Technical Feasibility Study Report

Climate-Resilient and Sustainable Livestock Development Project (RRP MON 53038-001)

Project Number: 53038 Loan and/or Grant Number(s): December 2020

Mongolia: Climate-Resilient Livestock Sector Development Project

ABBREVIATIONS

AFSD - Aimag Food and Agriculture Departments ALAMGAC - Agency for Land Management and Administration, Geodesy and Cartography AVSD - Aimag Veterinary Service Department ESD - Ecological Site Description FAO - Food and Agriculture Organization of the United Nations FUG - Forest User Groups GAFSP - Global Agriculture Food Security Program GAVS - General Administration of Veterinary Services GDP - Gross Domestic Product HAACP - Hazard Analysis Critical Control Point IFAD - International Fund for Agricultural Development ISO - International Organization for Standardization JFPR - Japan Fund for Poverty Reduction JICA - Japan International Cooperation Agency LCP - Livestock Competitiveness Project LGRC - Livestock Genetic Resources Centre LLC - Limited Liability Company LMIS - Livestock Management Information System LPCD - Livestock Development Policy and Coordination Department LSU - Live Sheep Units M&E - Monitoring and Evaluation MAHIS - Mongolian Animal Health Information System MF - Male Flock MNF - Mongolian Noble Fibre MOFALI - Ministry of Food, Agriculture and Light Industry MWCA - Mongolian Wool and Cashmere Association NAMEM - National Agency for Meteorology and Environmental Monitoring NF - Nucleus Flocks NFM - Nucleus Flock Managers PABU - Private Animal Breeding Units PCPU - Private Cashmere Processing Unit PFLU - Private Feedlot Unit PFU - Private Feeds Unit PIC - Project Implementation Consultants PIU - Project Implementation Unit PLMU - Private Livestock Marketing Unit PMU - Project Management Unit iii

PUG - Pasture User Group PVU - Private Veterinary Unit QCBS - Quality Cost Based Selection RDC - Research Development Center RUA - Rangeland Use Agreements SAU - Soum Agricultural Unit SDC - Swiss Development Corporation SFA - Sustainable Fibre Alliance SPA - Soum Pasture Association SPMWG - Soum Pasture Management Working Group SSC - Soum Steering Committee STT - Soum Technical Team SVU - Soum Technical Support Group SVU - Soum Veterinary Unit TSF - Terminal Sire Flock UNDP - United Nations Development Program UNESCO - United Nations Educational, Scientific and Cultural Organization

GLOSSARY Aimag - First level administrative sub-division, equivalent to a province. Bagh - Third level administrative sub-division, equivalent to a village Dzud - Severe climatic event in winter Govi - Desert area in southern Mongolia Khangai - Mountain range in central Mongolia About five herder families who stay together and have the Khot ail - same pasture or water sources. Khural - Elected body at bagh, soum, aimag or national level People who live in the same ecological environment, where Neg nutag/usniikhan - herders together possess the same pasture or water resources, and salt marshes. Saakhalt ail - The few khot ails or families that live nearby. The second level administrative sub-division, equivalent to a Soum - district

CONTENTS I. PROJECT CONTEXT AND RATIONALE 1 A. Need for Investment 1 B. Project Objectives and Outputs 5 II. PROJECT LOCATION 7 A. Project Area 7 B. Selection Criteria 9 III. LIVESTOCK SYSTEMS IN THE PROJECT AREA 11 A. National Context 11 B. Production Systems 12 C. Inputs and Services 16 D. Downstream Supply Chain 18 E. Subproject Implementation Arrangements 23 F. Inter-Aimag Pasture Use Administration 62 IV. LIVESTOCK SUBPROJECT DESIGN 65 A. Bulgan Aimag Subproject 65 B. Arkhangai Aimag Subproject 79 C. Uverkhangai Aimag Subproject 95 D. Bayankhongor Aimag Subproject 111 V. CAPACITY BUILDING 127 A. Overview 127 B. MOFALI 127 C. General Administration of Veterinary Services 133 D. Research Development Center 133 E. Inter-Aimag Pasture Use Administration 135 VI. IMPLEMENTATION AND OPERATING ARRANGEMENTS 137 A. Implementation Arrangements 137 B. Implementation Schedule 140 C. Operation and Maintenance of Project Investments 141 VII. CRITICAL RISKS 142 A. Lack of Water in Proposed Wells 142 B. Extreme Climate 142 C. Alignment with Interests and Expectations of Farmers and Other Stakeholders 142 D. Health Emergencies 142 E. Livestock Market 142 F. Operation and Maintenance of Project-Financed Infrastructure 142

List of Tables Table 1: Selected Project Area ...... 7 Table 2: Features of Traditional Classification of Regions ...... 9 Table 3: Herder Groups in the Project Area ...... 12 Table 4: Pasture User Groups and Soum Pasture Associations in the Project Area ...... 12 Table 5: Cooperatives in the Project Area ...... 13 v

Table 6: Forest User Groups in the Project Area ...... 13 Table 7: Water Points in the Project Area ...... 15 Table 8: Animal Shelters and Storages in the Project Area ...... 15 Table 9: Private Veterinary and Livestock Breeding Units in the Project Area ...... 17 Table 10: Registered Business Entities and Livestock Traders in the Project Area ...... 23 Table 11: Template for Aimag and Soum Subproject Indicators and Targets ...... 23 Table 12: Framework for Targets for PUG/RUA Establishment sub-agreements ...... 33 Table 13: Scope of PUG/RUA development ...... 34 Table 14: Herder numbers in Structures related to PUGs/RUAs ...... 34 Table 15: Framework for Targets for PUG/RUA Implementation ...... 35 Table 16: Targets for Animal Health ...... 39 Table 17: Framework for Targets for Livestock Marketing ...... 42 Table 18: Targets for Sheep Breed Improvement ...... 52 Table 19: Cashmere Marketing Targets ...... 61 Table 20: Land Classes in Bulgan Subproject Area ...... 67 Table 21: Population and Households in Bulgan Subproject Area ...... 67 Table 22: Herder Groups in Bulgan Subproject Area ...... 68 Table 23: Pasture User Groups and Soum Pasture Associations in Bulgan Subproject Area ....68 Table 24: Cooperatives in Bulgan Subproject Area ...... 69 Table 25 Forest User Groups in Bulgan Subproject Area ...... 69 Table 26: Water Points in Bulgan Subproject Area ...... 69 Table 27: Animal Shelters and Storages in Bulgan Subproject Area ...... 70 Table 28: Total Livestock Number in Bulgan Subproject Area for Selected Years ...... 70 Table 29: Livestock Numbers by Soum in 2019 ...... 71 Table 30: Private Veterinary Service Units in Bulgan Subproject Area ...... 72 Table 31: Traders of Livestock Products Bulgan Subproject Area ...... 73 Table 32: Major Problem and Buyers in Bulgan Subproject Area ...... 73 Table 33: Local Legislation in Bulgan Subproject Area...... 74 Table 34: Bulgan: Targets Related to Grazing Management Sub-agreements ...... 74 Table 35: Bulgan: Second-Generation Sub-agreements Targets ...... 74 Table 36: Number of and Type of Sub-Agreements in Bulgan Subproject Area ...... 75 Table 37: Bulgan Subproject Implementation Schedule ...... 75 Table 38: Livestock Outputs Without- and With-Project in Bulgan Subproject Area ...... 76 Table 39: Pasture Degradation Targets in Bulgan Subproject Area ...... 77 Table 40: Costs of Sub-agreements for Bulgan Subproject ...... 77 Table 41: Detailed Costs by Year for Bulgan Subproject ...... 77 Table 42: Land Classes in Arkhangai Subproject Area ...... 82 Table 43: Population and Households in Arkhangai Subproject Area ...... 82 Table 44: Herder Groups in Arkhangai Subproject Area ...... 83 Table 45: Pasture User Groups and Soum Pasture Associations in Arkhangai Subproject Area ...... 83 Table 46: Cooperatives in Arkhangai Subproject Area ...... 83 Table 47 Forest User Groups in Arkhangai Subproject Area ...... 84 Table 48: Water Points in Arkhangai Subproject Area ...... 84 Table 49: Animal Shelters and Storages in Arkhangai Subproject Area ...... 85 Table 50: Total Livestock Number in Arkhangai Subproject Area for Selected Years ...... 85 Table 51: Livestock Numbers by Soum in 2019 ...... 86 vi

Table 52: Private Veterinary and Animal Breeding Units in Arkhangai Subproject Area ...... 87 Table 53 Traders of livestock products in Arkhangai Subproject Area ...... 88 Table 54: Major Problem and Buyers in Arkhangai Subproject Area ...... 88 Table 55 Local Legislation in Arkhangai Subproject Area ...... 89 Table 56: Arkhangai: Targets Related to Grazing Management Sub-agreements ...... 90 Table 57: Arkhangai: Second-Generation Sub-agreements Targets ...... 90 Table 58: Number and Type of Sub-Agreements in Arkhangai Aimag ...... 91 Table 59:Arkhangai Subproject Implementation Schedule ...... 91 Table 60: Livestock Outputs Without- and With-Project in Arkhangai Subproject Area ...... 92 Table 61: Pasture Degradation Targets in Arkhangai Subproject Area ...... 93 Table 62: Costs of sub-agreements for Arkhangai Subproject ...... 93 Table 63: Detailed Costs by Year for Arkhangai Subproject ...... 93 Table 64: Land Classes in Uvurkhangai Subproject Area ...... 98 Table 65: Population and Households in Uvurkhangai Subproject Area ...... 98 Table 66: Herder Groups in Uvurkhangai Subproject Area ...... 99 Table 67: Cooperatives in Uvurkhangai Subproject Area ...... 99 Table 68: Water Points in Uvurkhangai Subproject Area ...... 100 Table 69: Animal Shelters and Storages in Uvurkhangai Subproject Area ...... 100 Table 70: Total Livestock Number in Uvurkhangai Subproject Area for Selected Years ...... 101 Table 71: Livestock Numbers by Soum in 2019 ...... 102 Table 72: Private Veterinary Service Units in Uvurkhangai Subproject Area ...... 103 Table 73: Traders of Livestock Products in Uvurkhangai Subproject Area ...... 103 Table 74: Major Problem and Buyers in Uvurkhangai Subproject Area ...... 104 Table 75 Local Legislation in Uvurkhangai Subproject Area ...... 104 Table 76: Uvurkhangai: Targets Related to Grazing Management Sub-agreements ...... 105 Table 77: Uvurkhangai: Second-Generation Sub-agreement Targets ...... 106 Table 78: Number and Type of Sub-Agreements in Uvurkhangai Aimag ...... 106 Table 79: Uvurkhangai Subproject Implementation Schedule ...... 106 Table 80: Livestock Outputs Without- and With-Project in Uverkhangai Subproject Area ...... 107 Table 81: Pasture Degradation in Uverkhangai Subproject Area ...... 108 Table 82: Costs of Sub-agreements ...... 108 Table 83: Detailed Costs by Year for Uvurkhangai Subproject ...... 109 Table 84: Land Classes in Bayankhongor Subproject Area ...... 113 Table 85: Population and Households in Bayankhongor Subproject Area ...... 114 Table 86: Herder Groups in Bayankhongor Subproject Area ...... 114 Table 87: Pasture User Groups and Soum Pasture Associations in Bayankhongor Subproject Area ...... 114 Table 88: Cooperatives in Bayankhongor Subproject Area ...... 115 Table 89: Forest User Groups in Bayankhongor Subproject Area ...... 115 Table 90: Water Points in Bayankhongor Subproject Area ...... 116 Table 91: Animal Shelters and Storages in Bayankhongor Subproject Area ...... 116 Table 92:Total Livestock Number in Bayankhongor Subproject Area for Selected Years ...... 116 Table 93: Livestock Numbers by Soum in 2019 ...... 117 Table 94: Private Veterinary Service Units in Bayankhongor Subproject Area ...... 118 Table 95: Traders of Livestock Products in Bayankhongor Subproject Area ...... 118 Table 96: Major Problem and Buyers in Bayankhongor Subproject Area ...... 119 Table 97: Local Legislation in Bayankhongor Subproject Area ...... 120 vii

Table 98: Bayankhongor: Targets Related to Grazing Management Sub-agreements ...... 120 Table 99: Bayankhongor: Second-Generation Sub-agreement Targets ...... 121 Table 100: Number and Type of Sub-Agreements in Bayankhongor Aimag ...... 121 Table 101:Bayankhongor Subproject Implementation Schedule ...... 121 Table 102: Livestock Outputs Without- and With-Project in Bayankhongor Subproject Area ... 123 Table 103: Pasture Degradation in Bayankhongor Subproject Area ...... 123 Table 104: Costs of Sub-agreements ...... 124 Table 105: Detailed Costs by Year for Bayankhongor Subproject ...... 124 Table 106: ...... 128 Table 107: Equipment Required for Livestock Management Information System ...... 130 Table 108: Consultant Package for Developing Livestock Management Information System .. 131 Table 109: ...... 132 Table 110: ...... 133 Table 111: Draft Capacity Building by Year and Cost ...... 134 Table 112: Proposed Equipment and Support for Capacity Building Research Development Center, Aimag Agriculture and Soum Agriculture Unit ...... 134 Table 113: Investment in Equipment by Inter-aimag Reserve Area ...... 136 Table 114: Investment in Capacity Building for Inter-aimag Pasture use Administration by Year ...... 136 Table 115: Project Steering Committee ...... 137 Table 116: Staffing of the Project Management Unit ...... 137 Table 117: Staffing of an Individual Project Implementation Unit ...... 138 Table 118: Inputs of the Project Implementation Support Consultant...... 138 Table 119: Proposed Consultant Team to be Financed from JFPR Grant ...... 139 Table 120: Composition of Soum Steering Committee ...... 140

List of Figures Figure 1: National Livestock Number Compared to Mongolian National Livestock Program ...... 3 Figure 2: Stocking Rate and Output ...... 4 Figure 3: Goats as a Percentage of Livestock Sheep Units ...... 5 Figure 4: Project Area ...... 8 Figure 5: Meat Production in Project Aimags (2010-2018) ...... 16 Figure 6: Cashmere Production in Project Aimags (2010-2018) ...... 16 Figure 7: Supply Chain of Livestock and Meat ...... 21 Figure 8: Structure of Sub-Agreements ...... 25 Figure 9: Overview of First- and Second-Generation Sub-Agreements ...... 26 Figure 10: Approach of Soum Renting Facilities to Business Units ...... 29 Figure 11: PUG Development Structures and Relationships ...... 31 Figure 12: Structures and Relationships in Animal Health ...... 38 Figure 13: Structures and Relationships on Livestock and Meat Marketing ...... 41 Figure 14: Structures and Relationships for Feed-Livestock-Markets ...... 44 Figure 15: Fodder-Livestock- Market Value Chain ...... 45 Figure 16: Sheep and Goat Breed Improvement Structures and Relationships ...... 48 Figure 17: Detailed Structures of Sheep/Goat Breed Improvement ...... 52 Figure 18: Structures and Relationships for Terminal Sire Flocks ...... 57 Figure 19: Detailed structures and relationships of the Terminal Sire Flock ...... 58 viii

Figure 20: Structures and Relationships on Cashmere Marketing ...... 61 Figure 21: Project Area in Bulgan Aimag ...... 65 Figure 22: Livestock Number Trend in Bulgan Subproject Area ...... 71 Figure 23: Project Area in Arkhangai Aimag ...... 80 Figure 24: Livestock Number Trend in Arkhangai Subproject Area ...... 86 Figure 25: Project Target Area in Uvurkhangai Subproject Area ...... 96 Figure 26: Livestock Number Trends in Uvurkhangai Subproject Area ...... 101 Figure 27: Project Area in Bayankhongor Aimag ...... 111 Figure 28: Livestock Number Trend in Bayankhongor Subproject Area ...... 117 Figure 29: Steps in Supporting the Legal and Socio-economic Environment for Pasture Management ...... 127 Figure 30: Livestock Management Information System Overview ...... 130 Figure 31: Process of Work on Carcass Feedback systems ...... 132

I. PROJECT CONTEXT AND RATIONALE

A. Need for Investment

1. There is a need for investment to support government and herder efforts aimed at conserving the natural resources on which herders rely to raise their livestock. These resources are being progressively degraded by excessive livestock stocking rates, exacerbated by climate change, and in some areas by increased mining activity. The overall effect is that the productivity of the livestock sector is in decline. The sector is becoming more and more susceptible to natural disasters such as dzuds. With each successive dzud, more herders, especially those with few livestock, have their businesses destroyed and move to urban centres.

2. There is a need for investment to reduce carbon emissions from livestock and increase carbon sequestration in soils. Mongolia’s large livestock population and extensive grasslands present both a challenge and an opportunity to reduce net emissions. This project has the opportunity to pilot systems to reduce emissions and sequester carbon into soils in 20 soums, representing approximately 4.2% of the land area of the country. A successful pilot will contribute to later expansion of systems to the whole country.

3. Stocking rates continue to increase, even though the impact on the environment is well recognized. This is testament to the complexity of the issue, and the scope of the challenge faced by the government and herders themselves. The Mongolian National Livestock Program (MNLP), approved in 2009, outlined the strategic, policy and operational steps needed for the sector to meet these challenges, and developed specific time-based targets for the sector. Much good progress has been made in recent years with progress towards laws on pasture management, laws on animal health, animal genetic improvement, and livestock insurance1. Processes are also well underway to strengthen marketing systems. However much more needs to be done. This project is well-placed to make a significant contribution to regulatory and market-based incentives for herders to reduce stocking rates.

4. Protection of natural resources requires investment in all areas that impact on livestock productivity. This includes water supply to enable access to relatively less used pastures and take pressure of over-used areas, improved livestock housing, improved animal health services, breed improvement, feeding and marketing of livestock products. The project aims to do this in 20 soums in four aimags from which lessons can be learnt for potential later adaptation and expansion on a national basis. Livestock identification systems for livestock and product marketing, and breed improvement are key areas for project investment. The project will work in the field, and at a national level in terms of capacity building.

5. The project will build on experience of many project investments in Mongolia over many years in the areas of grazing management, and livestock productivity. This project builds especially on the experience of the Swiss Development Corporation (SDC) project on pasture management; on the business-planning and demand-driven approaches piloted in the Global Agriculture Food Security Program (GAFSP)-funded project, the Livestock and Agricultural Marketing Project (LAMP) managed by World Bank with FAO technical support, and the ADB supported project Mongolia: Establishment of Climate-Resilient Rural Livelihoods (Financed by the Japan Fund for Poverty Reduction).

1 Rangeland protection law was submitted to Parliament in November 2017. The new “Animal Health Law” and “Animal genetics law” were approved by the Parliament on 8th December, 2017, 10 years after it has been initiated and discussed through 3 Parliaments.

6. The design of the project takes into account the current context of the country in terms of previous and ongoing investments in the sector. The project will work on all areas affecting livestock productivity in the 20 target soums. The project will take a capacity building approach in a national strategic sense in pasture management, focusing on the first and fourth priorities of the Mongolian National Livestock Program (Box 1).

Box 1: Priorities of the Mongolian National Livestock Program

The Mongolian National Livestock Program was developed in 2010 and remains a key policy document to guide investments in the sector. The program has five priority areas: 1) To drawing special attention from the State to the livestock sector as the main traditional economic activity of the country, to assist in the formulation of a favorable legal, economic and institutional environment for sustainable development, and to develop a good governance in the livestock sector; 2) Improving animal breeding services based on social need/demand, increasing the productivity and production of high quality, bio-clean livestock products and raw materials and increasing market competitiveness; 3) Raising the veterinary service standard to international levels and protecting public health through securing Mongolian livestock health; 4) Developing livestock production that is adaptable to climatic, environmental, and ecological changes with strengthened risk management capacity; and 5) Developing targeted markets for livestock and livestock products; establishing proper processing and marketing structures and accelerate economic turnover through an incentive system.

7. Context. Pastoralism has prevailed in Mongolia for many centuries and remains dominant in the country. The livestock sector engages 26% the country's labor force and produces 19% of gross domestic product (GDP). The livestock system is highly dependent on availability of pasture resources and natural and climatic conditions. Intensive or semi-intensive systems for the major livestock types essentially do not exist.

8. Livestock grazing pressure, measured as Livestock Sheep Units (LSU)2, has more than doubled since the 1990s, reaching 118 m LSUs in 2019. This is well above what is considered a sustainable stocking rate. National LSUs were between 50-55 million from 1961 to 1994 with no significant fluctuations. After 1994, LSUs rose to 72 million in 2000, dropping again to 46 million in 2004. The LSU rose to 69 million in 2009, before dropping again to 55 million in 2010. It rose again to 11 million in 2018. The rapid falls are due to a combination of poor summers and harsh winters, known as dzuds. Combined with high stocking rates, livestock enter the winter with relatively low bodyfat reserves needed to survive the winter. With each dzud, many herders who have lost livestock and cannot rebuild, stop herding and move to urban centers.

9. The Mongolian National Livestock Program developed targets for national LSU from a baseline of 71 m LSU in 2008, falling to 61 m LSU in 2012, before rising to 82 m LSU in 2021 (Figure 1). At current rates of increase in livestock numbers, Mongolia is on track to have an LSU of 160% of the MNLP 2021 target. With climate change and the impact of mining, creating a target for sustainable stocking rates is even more challenging.

2 In this system, sheep, goat, horse, cattle and camel are rated as 1, 0.9, 7, 6, and 5 Livestock Sheep Units respectively. 3

Figure 1: National Livestock Number Compared to Mongolian National Livestock Program

120

100

40 Live SheepUnits(millions)Live

20 1990 2000 2010 2020 Year

Live sheep units Mongolian National Livestock Program LSU

Source: FAOstat, Mongolian National Livestock Program

10. Rising stocking rates have damaged the pastureland. According to the National Report on the Rangeland Health of Mongolia (SDC 2018), and based on 2016 monitoring data, 42% of monitoring sites were judged to be in a “reference” or non-degraded state; 14% in slightly degraded, 21% in moderately degraded; 13% in heavily degraded and 10% in fully degraded level. The same report suggested that recovery would require 10 years but would be possible.

11. The general relationship of stocking rate to output through the two factors of output per unit of livestock and per unit of land is shown in Figure 2. The optimum stocking rate for output maximization is considered to be to the left of maximum output per unit area. In reality, the optimum stocking rate varies according to good or poor seasons. In the Mongolian situation, herders who increase their livestock numbers may not necessarily view this as an increase in stocking rate, which is one problem at the heart of the “tragedy of the commons”. The other major problem being a perceived lack of care for natural resources by individuals when those natural resources are in common use.

Figure 2: Stocking Rate and Output

Source: TRTA Consultant

12. At present, national stocking rates are to the right of the optimal zone. Both output per animal and output per unit of land area is relatively low. This is seen as relatively low reproduction rates, growth rates, survival rates, and product quality, as well as relatively high morbidity and mortality and high susceptibility to dzuds and other natural disasters. Natural resources are being degraded. Carbon emissions are relatively high and soil sequestration of carbon is low.

13. The project aims to provide some incentives for herders, and supporting systems and policies, to shift stocking rates in the direction of the “optimal zone”. A shift in the direction of the optimal zone will increase all these factors of productivity, and allow for natural resource recovery to proceed, all else being equal. Along with a shift in the direction of the optimal zone for stocking, the project will support improvements in other areas that affect productivity – breeding, genetics, health and marketing.

14. Climate change has the effect of shifting the optimal zone further to the left due to the impacts of lower rainfall and higher temperatures on pasture growth. Over the past 60 years, Mongolia's average air temperature has warmed by 1.60 degrees Celsius, rising 3 times faster than the world average. Climate change has led to a decline in pasture structure and composition, a decline in yields, and the replacement of native species with derivatives, increasing the likelihood of livestock food shortages.

15. Another key question related to optimal stocking rates and environmental impact is the role of goats. While goats are valued at 0.9 LSU based largely on the fact that they are smaller 5

than sheep and eat less feed, there is concern that this underestimates the impact on the environment of their grazing habits, both what and how they eat and how their hooves affect the soil. The goat population LSU as a percentage of total LSU, as shown in Figure 3, varied between 17% and 22% from 1961 to 1994. It rose to 41% in 2008, before dropping to 37% in 2018. The MNLP called for a reduction in the percentage of goats as LSU to 32% in 2021. This could be achieved if recent trends continue.

Figure 3: Goats as a Percentage of Livestock Sheep Units

Source: FAOstat

16. Another issue related to stocking rates is optimal herd structure within sheep and goat herds. For sheep self-replacing flocks, technically an optimal structure is one that has a high proportion of breeding ewes, and which turns off as many young sheep or older culls as possible which are not needed as flock replacements or for home consumption, before the winter. This has to be balanced with financial considerations of price fluctuations that mean sheep prices are lower as winter approaches due to high supply. For goats, optimal herd structure would generally mean that castrated males should be culled at around 4 years old, due to cashmere quality issues.

B. Project Objectives and Outputs

17. The project is aligned with the following impact: competitiveness and sustainability of Mongolia’s livestock sector improved (Mongolian Sustainable Development Vision 2030).3 The project will have the following outcome: efficiency and sustainability of climate-resilient livestock production increased.

18. The project will have three outputs: (i) climate resilience of livestock, pasture, and water management improved; (ii) livestock value chains strengthened; and (iii) livestock sector regulatory framework and capacity enhanced

19. The project will focus on reducing stocking rates. Reducing stocking rates will in itself increase livestock productivity, but the project will also support improved productivity through improved animal health, breeding and genetic improvement, animal feeding and value-adding.

20. The project is designed so that it provides a set of incentives for herders to reduce stocking rates. Herders who join together to form Pasture-User Groups (PUGs) and who enter into

3 Government of Mongolia. 2016. Mongolia Sustainable Development Vision 2030. Ulaanbaatar.

Rangeland Use Agreements (RUAs) with the soum to reduce stocking rates, gain access to additional project support. Only herders who join into PUGs and agree on RUAs are eligible to receive direct project benefits.

21. The project will achieve the first two outputs through support to five areas of work in the 20 project soums which aim to improve livestock productivity: (i) Development of Pasture User-Groups (PUGs) who then enter into agreements with the soums on Rangeland Use Agreements (RUAs) to reduce stocking rates and adjust herd structures. The project will support the implementation of the RUAs, through continued support on factors that improve livestock productivity. (ii) Animal health improvement through improving the quality and quantity of animal services to herders through Private Veterinary Units. (iii) Improved livestock marketing, focused on the meat and cashmere value-chain, and strengthening linkages between herders and processors; and support to cashmere sorting at soum level. (iv) Improved livestock feeding, including support to fodder production and infrastructure for fodder storage, and linking through to fattening lambs and to processors. (v) Improved sheep and goat breeding and genetics, and development of sheep terminal sire flock systems. 22. The project will take a demand-driven approach to investments at the soum level. This will strengthen business planning and analysis along the livestock supply chains.

23. The project will support the third output through capacity building activities, including: (i) Strengthening of the legal environment for pasture management; (ii) Development of a pilot livestock management information system and its testing in the project area; (iii) Establishment of a system of carcass feedback to suppliers, including animal identification systems, that will enable suppliers and processors to comply with market requirements; (iv) Strengthening the capacity of the General Administration of Veterinary Services (GAVS) in the traceability of livestock and livestock products through the establishment of the Mongolian Animal Health Information System (MAHIS) in the project area (v) Capacity building of the Research Development Center (RDC), formerly known as the National Agricultural Extension Center as well as capacity building of the four Aimag Agricultural Extension Centers under the Aimag Food and Agriculture Departments (AFADs) and 20 Soum Agricultural Offices (SAUs); and (vi) Supporting the development of three inter-aimag reserve areas—Chilen in Tuv and Bulgan aimags covering 34,100 ha, Khukhdel in Uvurkhangai Aimag covering 37,900 ha and Argalant in Bayankhongor and Govi-Altai aimags covering 118,600 ha.

II. PROJECT LOCATION

A. Project Area

24. Based on agreed selection criteria, three options for the project aimags and soums were identified during the inception phase. During the review meeting the mission noted that option 1 had a high potential overlap in terms of project area and supported activities with a recently approved World Bank project.4 MOFALI assured the mission that it will coordinate the ongoing detailed project design of the World Bank project with the planned interventions for the ADB project in order to maximize synergies and avoid duplication. At the request of the mission, the Consultant has organized coordination meetings with the World Bank project implementation team to avoid overlap between the projects. Based on this the project area was agreed with MOFALI to comprise 4 aimags and 20 soums (Figure 4). The 20 selected soums are: Mogod, Saikhan, Khishigundur and Gurvanbulag in Bulgan aimag; Khairkhan, Ulziit, Erdenemandal, Battsengel, Ugiinuur and Khashaat in Arkhangai aimag; Erdenetsogt, Bayan Ovoo, Ulziit, Jinst, Bogd in Bayankhongor aimag; and Baruunbayanulaan, Khairkhandulaan, Nariinteel, Taragt and Guchin Us in Uvurkhangai aimag. (Table 1).

Table 1: Selected Project Area No Target aimag Distance Number Names of target soums from of target Ulaanbataar, Soums (km) 1 Bulgan 350 4 Mogod, Saikhan, Khishig-Undur, Gurvanbulag 2 Arkhangai 465 6 Khairkhan, Ulziit, Erdenemandal, Battsengel, Ugiinuur, Khashaat 3 Bayankhongor 630 5 Erdenetsogt, Bayan-Ovoo, Ulziit, Jinst, Bogd 4 Uvurkhangai 450 5 Baruunbayanulaan, Khairkhandulaan, Nariinteel, Taragt, Guchin-Us Source: Asian Development Bank and MOFALI

25. Bulgan aimag is located in central part of the Orkhon and Selenge river basins, and borders with Arkhangai, Khuvsgul, Selenge and Tuv aimags. The biggest mountains are Bulgankhan, Buregkhangai, Dulaankhaan, Buteel and Khantai Darkhan khaan in the aimag. The rivers such as Selenge, Orkhon and Khanui flows through the aimag territory and there are the lakes of Khargal, Khunt and Airkhan and the spars such as Khulij, Khunt, Khanui and Asgat.

26. Arkhangai aimag is located in a central economic region, and borders with Zavkhan, Khuvsgul, Bulgan, Uvurkhangai and Bayankhongor aimags. The biggest mountains are Tarvagatai in the aimag. The rivers such as Orkhon, Khanui, Tamir and Chuluut flows through the aimag territory and there are the lakes of Ugii and Terkhiin Tsagaan.

27. Uvurkhangai aimag is located in central part of the country, and borders with Bayankhongor, Arkhangai, Bulgan, Tuv Dundgovi and Umnugovi aimags. The biggest mountains are Khitruun, Bituug, Bagabogd and Myangan Yamaat in the aimag. The rivers such as Ongi, Taats and Ar Aguit flows through the aimag territory and there are the lakes of Naiman Nuur and Taatsiin Tsagaan Nuur and the spars such as Khujirt, Mogoit, Khitruun, Khuremt, Taats, Must, Khuren Khad, Khorkhoin Turuu and Takhiin.

4 World Bank 2019: Livestock Commercialization Project. Project Appraisal Document. 19 November 2019.

Figure 4: Project Area

28. Bayankhongor aimag is located in west of the country and borders with Gobi-Altai, Zavkhan, Arkhangai, Uvurkhangai and Umnugovi aimags. The biggest mountains are Altain Nuruu and Ikh Bogd in the aimag. The rivers such as Tuin flows through the aimag territory the lakes of Buutsagaan Nuur the spars such as Shargaljuut, Khuremt, Khaliut and Urguut.

29. Bulgan aimag represents the khangai and steppe regions, Arkhangai represents the khangai region, Bayankhongor represents the khangai, steppe and govi regions, and Bayankhongor represents the khangai, steppe and govi regions. General characteristics of the khangai, steppe and govi regions are below summarized in Table 2.

Table 2: Features of Traditional Classification of Regions Indicators Khangai Steppe Govi -21.6ºC in Jan, -21.0ºC in Jan, -17.7ºC in Jan, Temperature: 15.7ºC in July 18.50ºC in July 20.80ºC in July Precipitation: 289 mm 234 mm 113 mm Cumulative temperature above 5ºC 1500ºC -2000ºC 2000ºC -2500ºC 2500ºC -3000ºC Days above 5ºC 140 160 170 Source: Technical team

B. Selection Criteria

30. Agreed criteria for selection of the project aimags and soums, and herder communities (herder groups, pasture user groups and forest user groups), are outlined as follows.

31. Selection criteria for project aimags are as follows: (i) moderate livestock density; (ii) pasture degradation; (iii) low coverage/enrollment by other donor projects in the same areas as the proposed project; (iv) geographical representation of khangai, steppe and govi regions;5 (v) need for water points in pasture; (vi) easy access to the millennium road network or transportation corridor; (vii) local development strategy or plan should be consistent with proposed project area; (viii) interest in involvement (response and cooperation): and (ix) national or aimag level administrated pasture reserves located in the aimag.

32. Selection criteria for project soums are as follows: (i) moderate livestock density; (ii) pasture degradation or underutilized pasture; (iii) low coverage/enrollment by other donor projects in the same areas of proposed loan; (iv) neighboring soums; (v) geographical representation of khangai, steppe and govi regions; (vi) need for water points in pasture; (vii) local development strategy or plan should be consistent with proposed project area; (viii) interest in involvement (response and cooperation); and

5 This is a traditional way of ecological and landscape classification. These categories are further elaborated in Appendix 3.

(ix) soums without national protected areas, or international protected areas (e.g., UNESCO Biosphere Reserves, IBA sites, Ramsar wetland sites), or project siting that is not near or within the drainage catchments of national or international protected sites within the soum.

33. Selection criteria for herder communities are as follows: (i) members of the herder communities must be citizens of the relevant soum; (ii) must have some pasture or water sources (traditional terminology neg nutag, gol usniikhan); (iii) must have current experience working together (e.g., pasture use, hay production, “khot ail”- neighboring group of households, and overcoming dzud and drought, etc.); (iv) must have accepted project concept and design and have willingness to cooperate with proposed loan under its prescribed terms and conditions including safeguards; (v) must have accepted to use pasture and water resources within carrying capacity under commonly agreed plans; (vi) should not be currently benefitting from similar activities of other donors; (vii) for current herder communities, a) 70% of members should not have changed since the establishment of the community, and b) the herder community is accepted by other herders and local government; (viii) should include female-headed herders as community members; (ix) involvement of poor herder households as at least 15% of total members; (x) should include women in decision-making roles in the community and (xi) should be willing to contribute to a soum pasture development fund (existing or newly created), equal to at least 20% of the project investments.

34. Selection criteria for the locations of proposed pasture water-points are as follows: (i) potential water point locations should not be located in national protected areas, cultural and sacred sites, national or international conservation significance; (ii) intended water users must meet with the above-mentioned criteria set for herder groups; and (iii) intended water point must be used following the pasture use plan of herder groups

Climate-Resilient and Sustainable Livestock Development Project (RRP MON 53038-001)

III. LIVESTOCK SYSTEMS IN THE PROJECT AREA

A. National Context

35. The livestock systems in the project area are representative of the three major systems found in the country – that of the Khangai, Steppe, and Gobi systems. Across all these systems, natural resources are being degraded by overstocking.

36. The nationally-accepted classification systems for land degradation and land recovery are shown in Box 2 and Box 3.

Box 2: Definition of Land Degradation Levels Land Degradation Level I. Non degraded All dominants are in place. II. Slightly degraded Key dominant are still dominating; some grazing sensitive forbs are in decline and grazing resistant species are in increase. III. Moderately degraded Dominants are in decline and replaced by other subdominants, number of species drops down. IV. Heavily degraded Remnants of key species are thinning, and abundance of degradation indicator species increases. V. Fully degraded Total vegetation cover is reduced or dominated by very few degradation indicator species.

Source: Meteorological National Agency for Meteorology and Environmental Monitoring, SDC

Box 3: Definition of Land Recovery Classes Land Recovery Class I. The plant community is at or near reference conditions (non-degraded) or requires 1-3 growing seasons for recovery from minor changes (slightly degraded); match stocking rate to forage supply and use temporary seasonal deferment as needed. II. The plant community is altered and may be rapidly recovered (3-5 growing seasons) with favorable climatic conditions or a change in management (e.g., stocking rate reduction, seasonal deferment, rotation). The nature of alteration is not regarded as a significant long-term threat to the provision of forage and other ecosystem services. III. The plant community is altered and may take 5-10 growing seasons to recover with changed management (stocking rate reduction, seasonal deferment, and long-term rest). Alteration represents a significant loss of important ecosystem services (and are clearly related to anthropogenic drivers), but recovery is possible in time. IV. The plant community is altered due to the local loss of key plant species, invasion of noxious plant species, or alteration of hydrology that is unlikely to be recovered for over a decade to many decades without intensive interventions such as species removal, seeding, or manipulations to recover historical hydrological function (i.e. an ecological threshold was crossed). Previous ecosystem services have been lost and are usually costly to recover. V. The plant community is altered due to extensive soil loss, accelerated erosion rates, or salinization. Altered plant-soil feedbacks or permanent changes in the soil profile maintain the degraded state. Previous ecosystem services have been lost and it is usually impractical to recover them (often regarded as true desertification).

Source: Meteorological National Agency for Meteorology and Environmental Monitoring, SDC

B. Production Systems

1. Livestock Management

37. Herder groups. Between 2002 and 2019, 232 herder groups were established in project area with a total of 4,357 members who used about 25% of the pasture area. On average, 31% of households enrolled to the herder groups (Table 3).

Table 3: Herder Groups in the Project Area Aimags Indicator Unit Overall Bulgan Arkhangai Uvurkhangai Bayankhongor Households no. 3,556 6,725 4,389 4,746 19,416 Herder households no. 2,677 5,332 3,202 3,448 14,659 Herder groups no. 48 90 36 58 232 Member households no. 577 1,919 423 1,438 4,357 Coverage of herders % 24% 39% 18% 44% 31% Pasture used by herder % 14% 39% 17% 31% 25% groups Source: Aimag governments, Feb-May 2020

38. Pasture User Groups. There are 73 pasture use groups (PUGs) in the project area of which 4 are in Bulgan Aimag, 43 in Arkhangai Aimag and 26 in Bayankhongor Aimag (Table 4). Total membership is 3,496 persons, accounting for about 24% of the 14,576 herder families in the project area. Arkhangai and Bayankhongor aimags are the main locations for pasture user groups. These groups were established by the Mercy Corps. Under the “Gobi Initiative”, UNDP under “Sustainable Land Management for Desertification”, IFAD under “Market and Pasture Management”, JICA under “Well Water Point”, SDC under its “Green Gold Program”, and by local government units.

Table 4: Pasture User Groups and Soum Pasture Associations in the Project Area Pasture User Groups Soum Enrollment to Herder Aimag name Pasture Pasture User Number Members families Associations Groups Bulgan 4 28 2 2,759 1% Arkhangai 43 2,522 - 4,894 52% Uvurkhangai - - - 3,286 0% Bayankhongor 26 946 2 3,637 26% Total 73 3,496 4 14,576 24% Source: Aimag governments, Feb-May 2020

39. Soum Pasture Associations. There are 4 Soum Pasture Associations (SPA) in the project area, of which two are in Bulgan Aimag (Mogod and Saikhan soums) and two are in Bayankhongor Aimag (Jinst and Bogd soums).

40. Cooperatives. There are 132 cooperatives in the project area of which 15 are in Bulgan Aimag, 36 in Arkhangai Aimag, 40 in Uvurkhangai Aimag and 41 in Bayankhongor Aimag (Table 5). Total membership is 6,063 persons, accounting for about 34% of the herder families. Of these cooperatives, 72 are herder cooperatives with a total of 4,917 members.

Table 5: Cooperatives in the Project Area Cooperatives Herders cooperatives Herder Enrollment to Aimag name Quantity Members Quantity Members families cooperative Bulgan 15 209 10 200 2,759 7% Arkhangai 36 2,280 25 1,968 4,894 40% Uvurkhangai 40 1,177 14 1,345 3,286 41% Bayankhongor 41 2,397 23 1,404 3,637 39% Total 132 6,063 72 4,917 14,576 34% Source: Aimag governments, Feb-May 2020

41. In accordance with the Law on Cooperatives, a cooperative should have at least 9 members. In this regard, the cooperatives created in rural areas have a small number of members. The government’s policy of “one bagh-one cooperative” together with the policy on wool incentives has resulted in formation of many rural cooperatives with larger herder membership. Because the wool incentive or premiums in cash was only distributed to herder members of the cooperatives they were informally called “herder cooperatives”. These cooperatives do not carry out any pasture protection activities, but trade in livestock products. Hence, it would be appropriate to cooperate with them to link herders with processing factories.

42. Forest user groups. There are 24 forest user groups (FUGs) in the project area, where there are project forest resources, of which 15 are in Bulgan Aimag, 3 in Arkhangai Aimag, 3 in Uvurkhangai Aimag and 3 in Bayankhongor Aimag (Table 6). The purpose of FUGs is to protect the forest resources and not the pasture. FUGs in the project area have a total of 929 members, 6% of the total herder households.

Table 6: Forest User Groups in the Project Area Forest User Groups Herder Enrollment to Forest Aimag name Quantity Members families User Groups Bulgan 15 866 2,759 31% Arkhangai 3 15 4,894 0% Uvurkhangai 3 - 3,286 0% Bayankhongor 3 48 3,637 1% Total 24 929 14,576 6% Source: Aimag governments, Feb-May 2020

43. Pasture User Organizations. Pasture user organizations, including herder groups and the pasture user groups, were analyzed in terms of institutional characteristics to understand their structure, governing rules, operations, resource use, maintenance and control to determine if they use pasture resources in a long-term sustainable manner.

44. Pasture user organizations were mostly established on the initiative of donors and operate following the donor’s approach: a few were established through the herders’ own initiative. Organizations have their own rules, but most are not written down, the herders maintaining and transmitting them verbally. Each organization consists of a group leader and members: sometimes there are also governing and control boards, and a person in charge for finance and mutual funds. It has free membership, usually one herder household is considered as one member. Enrolment of the herder households of the soum is comparatively low, for example 18- 24% in the project area in Uvurkhangai and Bulgan aimags, and 39-44% in Arkhangai and Bayankhongor aimags. The main objectives of the organizations are to use and protect pasture areas in a sustainable manner, develop and maintain water wells, prepare hay and fodder, build shelters, and undertake heavy work communally.

45. Pasture user organizations normally meet at least twice a year, and the leader is elected from the members democratically. The organizations decide when to move or seasonal otor movements and pasture release. Most have a pasture management plan, which is usually agreed verbally. Although they make joint decisions, planned activities are not always successful due to many internal and external factors.

46. The project soums reported they use pasture in accordance with the land law. However, herder groups lack understanding of such legislation. Attempts have been made to regulate pasture use and protection in various ways in the soums. For example, Battsengel and Erdenemandal soums in Arkhangai Aimag; Erdenetsogt Soum in Bayankhongor Aimag; and Jinst, Bayan-Ovoo and Guchin-Us soums in Uvurkhangai Aimag have a regulation on responsible pasture use, and Mogod Soum in Bulgan Aimag, Khairkhan and Ulziit soums in Arkhangai Aimag, Guchin-us Soum in Uvurkhangai Aimag, and Taragt and Ulziit soums in Bayankhongor Aimag have developed pasture management plans and discussed them at bagh citizens meetings. Ugiinuur Soum in Arkhangai Aimag, has no clear local regulations for use of the pasture. Some project area soums have included the tasks relevant to pasture carrying capacity, pasture utilization, and water well management in their Soum Development Plan for 2000-2025.

47. The members of pasture user organization cooperate to undertake heavy work. However, tasks relevant to pasture use such as rotation, release and protection are rarely undertaken. Soum and bagh governors unanimously agreed that this activity has stopped in the soums and rated implementation of the pastureland management plan as average to poor. Bogd Soum in Bayankhongor Aimag rated it as bad to good but could not be specific about the meaning of good.

48. Soum governments accept pasture user organizations, and the soum administration has a record of these organizations. A few local government units in the project area have helped them to receive loans from the Small and Medium Enterprise Fund and Soum Development Fund.

49. Only a few herder groups have created group funds, for example the groups in Ugiinuur Soum of Arkhangai Aimag and Nariinteel Soum of Uvurkhangai Aimag have about MNT3.0 million and MNT2-7.2 million, respectively in their funds. Individual herder contributes about MNT50,000 to groups funds. Some of the groups, especially those funded by the SDC Green Gold project, have contributed to the credit and saving cooperative in the soum, and others have created a matching fund, which receives matching contributions from the SDC project against herders’ contributions. As herders reported, it takes at least 30 days to receive a finance from the matching fund because it is administered by the aimag pasture association, which has a representative in the soum. This suggests that there is no soum pasture association, but a branch or representative of the aimag pasture association in the soum.

2. Pasture Infrastructure

50. There are 919 deep wells in pastureland, 723 springs, 190 lakes and ponds, and 167 rivers in the project area (Table 7). There is reported a need for an additional 382 deep wells to be established to ensure sufficient drinking water for livestock numbers within the carrying capacity and to relieve grazing pressure from pastures near existing wells. Grazing pressure will be reduced because currently underused pasture will be improved thus expanding the livestock pasture resources. Water supply infrastructure for pasture lands is in serious disrepair and urgently needs to be improved, not only as drinking water for the livestock but also to prevent pasture degradation. Traditionally, individual water points constructed for livestock watering include both comparatively high yielding deep wells and shallow/hand-made wells. Due to lack of maintenance issues, deep wells in particular have degraded since the transition period and the 15

number of operational wells has sharply declined. This has forced herders to move their stock to areas around the decreasing number of operational wells and close to rivers. Thus the carrying capacity of pastures in these areas is far exceeded, causing serious land degradation and leading to unsustainability.

Table 7: Water Points in the Project Area Lakes and Additional wells Aimag Deep wells Springs Rivers ponds required Arkhangai 353 137 127 22 172 Bulgan 163 124 28 43 76 Uvurkhangai 250 196 10 34 56 Bayankhongor 153 266 25 68 78 Total 919 723 190 167 382 Source: Aimag governments, Dec 2019

51. There are 7,288 open livestock enclosures without a roof, 9,281 semi-roofed livestock enclosures, 2,086 livestock sheds with wall and roof, 8,414 winter and spring camp with certificates,6 and 40 fodder storages in the project area (Table 8). Achievement of sustainable pasture management that does not exceed the carrying capacity of pasture through rehabilitation of degraded pasture requires open alternative pasture with improved livestock enclosures, livestock sheds and fodder storage.

Table 8: Animal Shelters and Storages in the Project Area Open Semi-roofed Livestock Camps with Fodder Soum name enclosures enclosures Sheds certificate storage

Arkhangai 1,885 4,226 1,549 1,326 5 Bulgan 1,504 1,902 65 2,483 6 Uvurkhangai 1,770 1,566 - 2,383 8 Bayankhongor 2,129 1,587 472 2,222 21 Total 7,288 9,281 2,086 8,414 40 Source: Aimag governments, Dec 2019

3. Livestock Numbers and Output

52. There were 20.1 million head of livestock in the four project aimags in 2019, which accounted for about 28.3% of the country's total livestock number. The project aimags produced about 140,000 tons of meat in 2018, accounting for 27% of national production: Arkhangai Aimag produced 41,500 tons, Bayankhongor Aimag 18,800 tons, Bulgan Aimag 37,000 tons, and Uvurkhangai Aimag 43,100 tons (Figure 5).

53. There were 6.2 million head of livestock in the project area in 2019, which accounted for 8.7% of the country's total livestock number. Output of livestock products is seasonal due to the pastoral production system, which depends on the production of pasture with the project area accounting for of 5.3% of the national total. Annual production of meat by project soum ranged between 484 tons and 3,190 tons in Arkhangai Aimag, 170 tons and 1,315 tons in Uvurkhangai Aimag, and 640 tons and 757 tons in Bayankhongor Aimag.

6 According to the Law on Land clause 52.7, land under winter and spring camps can be possessed by khot ail. As per this legal ground, the certificate has been issued for such camps by the soum government.

Figure 5: Meat Production in Project Aimags (2010-2018)

50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000

Slaughtering weight, tons 10,000 5,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018

Arkhangai Bayankhongor Bulgan Uvurkhangai

Source: National Statistical Office, 2020

54. The project aimags produced a total of 2,930 tons of cashmere in 2018, which accounted for 29.3% of the national production of 10,000 tons. Production by aimag was 490 tons in Arkhangai, 1,180 tons in Bayankhongor, 330 tons Bulgan and 970 tons Uvurkhangai (Figure 6). Individual soums in Arkhangai Aimag produced between 26 and 30 tons, in Uvurkhangai Aimag between 37 and 67 tons and in Bayankhongor Aimag between 45 and 70 tons.

Figure 6: Cashmere Production in Project Aimags (2010-2018)

1.40

1.20

1.00

0.80

0.60

0.40

0.20

- 2010 2011 2012 2013 2014 2015 2016 2017 2018

Arkhangai Bayankhongor Bulgan Uvurkhangai

Source: National Statistical Office, 2020

C. Inputs and Services

1. Government Offices

55. There are about 30 public servants in each Soum Government Administration. The Soum Agricultural Unit (SAU) belongs to the Soum Government Administration in terms of the salary 17

and operational costs but works with MOFALI and its affiliated organizations in terms of professional activities and directions. The SAU consists of 2 or 3 specialists, who are responsible for pasture, crop production, small and medium enterprises, trade, livestock planning, breed registration, safety of raw materials, livestock forages. The Soum Veterinary Unit (SVU), which belongs to the Aimag Veterinary Service Department, consists of 1 or 2 specialists who are a veterinarian and an epidemiologist. The SVU is responsible for monitoring implementation of sectoral policies, laws and decrees in the soum territory, provision of professional and methodological support to the activities of private veterinary service units and contracted veterinarians, and ensuring the implementation of laws and standards, monitoring the implementation of technologies and quarantine measures to combat and prevent animal diseases, and implementing the investigation and resolution of violations within the framework of relevant legislations. The SVU also monitors the PVUs and the movement of livestock, and prevention of infectious and parasitic diseases of animals on the basis of epidemiological studies, orders the necessary drugs and biopreparations, and collects and distributes them to the PVUs.

56. The soum land officer belongs to the Aimag Land Administration Department and is responsible for carrying out annual land management planning and implementation, updating and enriching the land cadaster database, concluding and evaluating contracts with land owners, possessors and users, land tax and payment, and carrying out annual assessment of pasture photo-monitoring.

57. The soum state environmental inspector belongs to the Aimag Professional Inspection Department and is responsible for organizing and ensuring the implementation of environmental protection legislation, decisions of aimag and soum Citizens' Representatives Khural and local governors, implementing environmental inspection duties, coordinating the activities of the government, citizens and business entities, providing methodological guidance for the rational use of natural resources, and enforcing relevant laws and regulations.

2. Animal Health

58. There are 54 private veterinary units (PVUs) in the project area (Table 9). Legally, PVUs must provide general or specialized professional care and services in the field of prevention, diagnosis, treatment of all or certain types of animal diseases, combating infectious diseases, ensuring safety of animal originated raw materials.7 PVUs must be a legal entity with a veterinarian accredited to provide professional services, premises and equipment that meet the standard requirements.

Table 9: Private Veterinary and Livestock Breeding Units in the Project Area Aimags Private veterinary Units Private livestock breeding units Bulgan 16 - Arkhangai 15 2 Uvurkhangai 12 2 Bayankhongor 11 1 Total 54 5 Source: Technical team survey, Feb-May 2020

7 The PVUs can also provide the special specialized veterinary care and services in mobile and localized means.

D. Downstream Supply Chain

59. Since transition to a market economy, the state-centralized supply system of livestock products has collapsed. While there is an organized market system with infrastructure to ensure free flow of agricultural and industrial goods there are many intermediaries who collect livestock, meat and livestock raw materials from herders to deliver to buyers. Thus herders face significant difficulties in selling their livestock, meat, wool, cashmere, leather and other by-products for a reasonable price. The marketing system is currently uncontrolled with intermediaries, who are called “changers”, the main players in the supply of raw materials. Livestock or meat comes from the herder to the markets directly or through these intermediary traders in soum and aimags.

60. The herders reported that their products are sold at low prices due to (i) lack of the centralized state system, (ii) lack of a local soum slaughterhouse, and (iii) lack of the local factory representatives enabling them to sell to the factory. Major players in the meat supply chain are herders, middleman traders in the soum and aimag, abattoirs, meat factories and the state veterinary authority. Main markets are the wholesale and retail markets in aimag centers and Ulaanbaatar, and meat factories. Major domestic markets are the Emeelt and Khuchit Shonkhor markets in Ulaanbaatar. During cold seasons, meat is mostly traded while in warm seasons live animals are largely traded depending on the road connection between the soum and marketplaces. For this reason, 90% of meat is slaughtered in a traditional way in local areas and the remaining 10% is prepared by meat factories. Forty eight percent of slaughter houses, 66% of processing plants, and 79% of storage capacity are located in Ulaanbaatar city and its surrounds, and the remaining 52% of slaughter houses, 31% of processing plants, and 21% of storage capacity located in local areas.

61. Collection of the livestock or meat (inputs) is usually done by rural and urban traders, herders, and producers. Rural traders collect inputs from their areas and bring them to the markets and/or factories of the company in Ulaanbaatar or the aimag center. Among input buyers, Chinese traders are strong players. Shipment of inputs are managed mainly by sellers when they bring them to urban markets. Different kinds of lorries—made in Korea, China or Russia—are used for transportation, despite delivery on foot.

62. Availability of livestock and meat in the market differs by month and season: typical slack months for input supply to factories are March to May, which may also extend into February and June depending on factory capacity. The peak period for input supply is from September to November, when animals are fattened. Supply of the livestock increases but at the same time buyers’ competition increases. During this period, factories try to buy and store sufficient livestock or meat to cover their annual production, depending on their financial and storage capacity. Thus a large storage inventory needs to be maintained. The quality of livestock also differs by season due pastoral livestock production system and the livestock only gain weight during autumn.

63. The problems that affect the reliability of input supply include: (i) supply variation by season and price fluctuation; (ii) lack of a consistent quality; (iii) financial problems along the supply chain; and (iv) outbreaks of animal diseases, which are a major problem particularly when there is an outbreak of a class A animal disease8 that results in a ban on meat exports. Processes

8 Transmissible diseases that have the potential for very serious and rapid spread, irrespective of national borders, that are of serious socio-economic or public health consequence and that are of major importance in the international trade of animals and animal products. Examples: Foot and mouth disease, Swine vesicular disease, Peste des petits ruminants, Lumpy skin disease, Bluetongue, African horse sickness, Classical swine fever, Newcastle disease, Vesicular stomatitis, Rinderpest, Contagious bovine pleuropneumonia, Rift Valley fever, Sheep pox and goat pox, African swine fever, Highly pathogenic avian influenza. 19

at factories differ depending on local conditions, including the methods of animal preparation, slaughter, skinning, chilling, cutting, sorting, freezing, deboning, sorting, packaging, and freezing, which continue for up to 9 months depending on the factory. Those with heat treatment lines can process for longer. Most factories have introduced, or are in the process of introducing, Hazard Analysis Critical Control Point (HAACP) and certain ISO standards.

64. The main destinations of exports are China, Russia, Kazakhstan, and the Middle East. Purchasers of the export products are exclusive buyers, foreign wholesale distributors, and a few large factories. Sale of the product to the purchasers is managed by the producers. Delivery of the product is managed by the shippers or buyers. Shipment of products depends on seasonal availability of the inputs. Exports are made by road, rail, and sometimes by air. Terms of sale are ex-factory, border, or loading port. The factories obtain the sanitary certificate, certificate of origin, conformity certificate, certificate of quarantine, and custom declaration, which takes up to 7 days.

65. Factories reported that weaknesses in inbound supply chain are disease outbreak, financial resources, seasonal input supply, special transportation means, and road conditions, and the weaknesses in outbound supply chain are dealing with government institutions (professional inspection), difference of laboratory analysis in China, limited quota on export, prices, special transportation means, and improper application of tariff in Russia.9

66. There are nine meat factories in the project aimags, including one in Bulgan, three in Arkhangai, four in Uvurkhangai, and one Bayankhongor: (i) Bulgan Aimag. • Makh Market LLC, a slaughtering capacity of 150 big and 250 small animals per day, which has heat treatment processing;10 (ii) Arkhangai Aimag, • Khangain Khuns LLC, a slaughtering capacity of 200 big and 1,000 small animals per day, which has heat treatment processing, • Nairulga LLC, a slaughtering capacity of 100 big and 800 small animals per day, and • Arbuka LLC, a slaughtering capacity of 30 big and 100 small animals per day; (iii) Uvurkhangai Aimag, • Delkhiin Khuns LLC, a slaughtering capacity of 15,000 tons of heat-treated meat, • Deejiin Urguu LLC, a slaughtering capacity of 100-250 big and 500-1,000 small animals per day, • Uv Meat LLC, a slaughtering capacity of 40-50 big and animals per day, and • Dalai Odod LLC, a slaughtering capacity of 100 big and 250 small animals per day: and (iv) Bayankhongor Aimag,

9 TTFA for Mongolia Agricultural Export: Survey of Selected Meat Companies, D.Nyamdorj, B.Ariunbold, 2018 10 The company was supported by ARDP in December 2019 for an abattoir equipment replacement in Erdenet city, implementing a pilot project on meat traceability in Bulgan and Khuvsgul aimags, producing new products such as canned meat.

• Makh Mart LLC, a slaughtering capacity of 100 big and 1,000 small animals per day, 3 storages each of 600 tons (-16ºC to -18ºC), refrigerator of 6 and 2 tons (-25ºC to -32ºC).

67. Meat and cashmere are major sources of income for the herder households. Cooperatives, factories and private traders (middleman called “changers”) compete with each other in the collection and supply of livestock and livestock products such as meat, cashmere and wool, and hides and skins to markets. Among them the middleman play a significant role. The market channel of livestock and livestock products is mostly similar in all the project soums (Figure 7).

Figure 7: Supply Chain of Livestock and Meat

Source: TRTA Consultant

68. Herders mostly transport to the central markets, either with their own lorry or pay a fee per head of livestock or per ton for hired transport. In general, in the warm seasons live animals are transported and in cold seasons carcasses. 11

69. Cashmere supply chain. Cashmere is prepared by local herders and collected by local cooperatives or middleman in a similar way to other livestock products. There are 15 deep processing plants, 23 primary processing plants, 59 small and medium-sized knitting factories and 150-200 small household workshops in Mongolia. There are no cashmere factories in the project aimags.

70. ADB has collaborated with MOFALI to develop a Mongolian Noble Fibre certification mark for cashmere.12 Mongolian Noble Fibre (MNF) certification mark was officially registered at the Mongolian Intellectual Property Office in 2013. MNF certification mark registration to selected target countries was done through the World Intellectual Property Organization and received grant protection from 33 countries in target markets. Obligations to grant MNF certification mark was subcontracted by MOFALI to the Wool and Cashmere Association of Mongolia on 18 Oct 2018. Potential participating private enterprises were selected which are suitable for meeting and maintaining MNF levels of performance. Required technical training is in progress. Currently three enterprises have been awarded MNF certification for final products and de-haired fiber, one which has signed a memorandum of understanding with their international partner during the MNF international forum.

71. Also Sustainable Fibre Alliance (SFA) Mongolia, a non-profit international organization, works with the extended cashmere supply chain, from herders to retailers, aiming to promote a global sustainability standard for cashmere production in order to preserve and restore grasslands, ensure animal welfare and secure livelihoods. SFA has a global membership of 50 companies with 102 brands13 in 10 countries.14 Delegations of SFA has been working since 2015 and SFA Mongolia officially opened in 2019. SFA Mongolia is currently working with 70 herder organizations (cooperatives, partnerships, herder groups) in the country. SFA certifies those herder organizations, who wish to cooperate with SFA member factories, in areas of “Animal husbandry and cashmere fibre harvesting code of practice C001”, and “Rangeland stewardship code of practice C002”. Those national factories who wish to cooperate with SFA member factories abroad are certified in areas of “Sustainable fibre processing code of practice (C003)”. SFA Mongolia links certified herder organization directly to its certified national companies.

72. There are 226 registered business entities in the project area, of which 76 are in Bulgan Aimag, 56 in Arkhangai Aimag, 67 in Uvurkhangai Aimag, and 27 in Bayankhongor Aimag who trade livestock raw materials, animal feeds, poultry, medicine, construction materials and cement; and engage in banking, logging, hotels, carpentry, cafeterias, and food trade. Of these, there are 61 trading entities and 8 citizens that collect, and trade, livestock originated products (Table 10).

11 Typical lorries used for transportation include: Porter-1.2 tons, Frointer-1.5 tons, Bongo-1.5 tons, Istana, microbus, ISUZU -3 tons, Kanter-3 tons, Мighty-3.5 tons, Daewoo-3.5 tons, FUSSO-7 tons, Shalaanz Hino-10 tons. A Porter contains 20-25 small animals, Frontier-25-30 small or 6 big animals or 70-80 carcasses, Istana- 50 carcasses, Shalaanz 100-120 small animals or 50-70 big animals. 12 Asian Development Bank. 2020. Loan 3287/3288-MON: Agriculture and Rural Development Project- Additional Financing (ARDP AF) and TA 8960-MON: Supporting Agriculture Value Chain. Memorandum of Understanding 13 Among the brands are Alex Begg, Artwell, Brodie Cashmere, Burberry, C&A, Colombo, Erdos, Falconeri, Hebei JiaXing Cashmere Co.,Ltd, Hongtai, Inditex, J.Crew, John Lewis , Jonstons of Elgin, Joshua Ellis, London Cashmere, LVMH, M&S, Madewell, Ningbo Zhongxin, Oyuna, Robert Todds, Schneider, and UPW. 14 Participating countries include the United Kingdom, Hong Kong, Belgium, Italy, USA, France, China, and Mongolia. 23

Table 10: Registered Business Entities and Livestock Traders in the Project Area Aimag Business Traders of Meat, By-products, Individuals and Legal Entities Entities Wool and Cashmere for Primary Processing Bulgan 76 14 1 Arkhangai 56 17 - Uvurkhangai 67 15 1 Bayankhongor 27 15 6 Total 226 61 8 Source: TRTA Consultant, Feb 2020

E. Subproject Implementation Arrangements

1. Aimag Level Subprojects

73. The investments in project soums will be structured through four aimag subprojects. Each aimag subproject will consist of an aggregation of soum-level annual targets which align with the project outputs: grazing management, animal health, breeding, feeding, marketing and environment. The structure for soum indicators and targets is shown in Table 11.

Table 11: Template for Aimag and Soum Subproject Indicators and Targets Soum ……. Indicator Base 1 2 3 4 5 6 Livestock population (LSU) in soum LSU as a % of starting LSU 100% 100% 100% 100% 94% 94% 88% No. PUGs/RUAs No. Bag-level PUG alliances functioning 6 No. soum-level Pasture Societies 1 functioning No. PVUs functioning No. sheep PABUs registered No. ewes in sheep PABUs No. goat PABUs registered No. does in goat PABUs No. of Terminal Sire Flocks No. Private Feeds Units functioning No. Private Livestock Marketing Units (PLMU) functioning No. sheep marketed through PLMUs No. Private Lamb Fattening Units (PLFU) functioning No. lambs fattened in PLFU No. Private Cashmere Processing Units (PLMU) functioning No. tonnes cashmere processed through PCPUs Source: TRTA Consultant

74. The soum- and aimag-targets are living targets that can be updated each year, based on experiences during implementation. The development of the targets for the aimag subprojects, based on the targets for each soum, will be a participatory process. However, it is part of the overall project agreement that each soum should have reached 88% of starting LSU by the end of the project, and have RUAs in place by the end of the project that will lead to a level of 82% of starting LSU by the end of Year 8.

2. Soum Level Subprojects

75. Once the aimag subprojects are agreed, soum-level entities can submit proposals for first generation sub-agreements. The PMU in collaboration with the PIC, will provide the templates and guidelines for the sub-agreement proposals, the basic structure of which will be similar across all soums for the specific types of sub-agreements. The process is therefore demand-driven but within an agreed framework.

76. The sub-agreement proposal process of itself builds capacity in business planning, and principles of investment. The approach recognizes that the major factor affecting success or otherwise of an investment is the motivation of the people involved.

77. Objectives. The sub-agreements aim to establish the organizational structures, relationships and agreements to create an enabling environment for value-chains to function. They support the development of value-chains through project support to the key private or public sector entities along the value-chain, and to the support to forward and backward linkages along the value-chain.

78. Project support is designed to reduce some of the risk of investment in improving the value-chains, through financing civil works, equipment and supplies, and services. The sub- agreements will contribute to all three project outputs. The general structure of a sub-agreement is shown in (Figure 8). The project finances civil works, equipment and supplies and services to soum government bodies or equipment, supplies and services to various business units that are engaged in a value chain. The project des not finance any civil works that go directly to private business units. The project can finance construction of civil works in the soum that belong to the soum government. The soum can rent or (issue of user-rights) to private business units. In any sub-agreement, the soum government or the business units will be expected to contribute their own human, physical and financial resources. The feasibility of the sub-agreement is measured by the feasibility of the individual business plans of the business units and the soum government, and the functionality of the linkages between them. The investment analysis of the project is measured against the project costs and the contribution to the project outputs, comparing with- and without-project scenarios. The general structure of a sub-agreement proposal is shown in Figure 8.

Figure 8: Structure of Sub-Agreements

Source: TRTA Consultant

79. The sub-agreements in combination with the capacity building aim to strengthen vertical and horizontal linkages at the soum, aimag and national level. This is explained further under each sub-agreement description.

80. Types of sub-agreements. There are seven types of sub-agreement falling into two major categories – first- and second-generation sub-agreements (Figure 9).

81. The first-generation sub-agreements are: (i) PUG/RUA development sub-agreements (1 per soum15) (ii) PUG/RUA implementation sub-agreements. (1 for each bagh. 6 per soum)

82. The second-generation sub-agreements are: (i) Private Veterinary Units (PVU) development sub-agreements (1 per soum) (ii) Private Livestock Marketing Units (PLMU) development sub-agreements (1 per soum15) (iii) Private Animal Breeding Units (PABU) development sub-agreements (1 per soum15) (iv) Private Feeds Units (PFU), Private Feedlot Units (PLFU) and Herder Feeding (1 per soum15)

15 The number of sub-agreements per soum are indicative only, since the sub-agreements are demand driven. There is no set budget for aimags and soums.

(v) Private Cashmere Processing Unit (PCPU) development sub-agreements (1 per soum15)

Figure 9: Overview of First- and Second-Generation Sub-Agreements

Source: TRTA Consultant

83. First-Generation sub-agreements. The soum can submit proposals for PUG/RUA establishment sub-agreements from the start of the project. When an individual bag has 80% of herders in the bag registered as PUGs and with RUAs, a proposal can be submitted for a PUG/RUA implementation sub-agreement. The PUG/RUA sub-agreement continues until either PUG/RUA targets are reached or the soum believes it cannot develop any more.

84. Second-Generation sub-agreements. Proposals for second-generation sub- agreements will only be accepted when two pre-conditions have been met. Firstly, that two bagh- level PUG/Neg Nutag Pasture Alliances have been established, with membership of 80% of herders in the bagh who have established PUGs and entered into RUA agreements with the soum; and that the minutes of the first Alliance meeting have been tabled. Secondly that the soum-level Soum Pasture Society has been established based on the membership of at least two PUG/Neg Nutag Pasture Alliances, and the chiefs of the other baghs, which have not formed PUG/Neg Nutag Pasture Alliances, and the minutes of one meeting have been tabled. 27

85. Improving grazing management and reducing stocking rates thereby improving productivity and protecting the natural resource is the most important work of the project. The PUG/RUA implementation sub-agreements, and those on breeding, feeding and marketing are part of the incentive system for herders to form RUAs and agree on RUAs with the soum. Another way of stating this is that if herders are interested in improving productivity and protecting the natural resource for future generations, the most important thing they need to do is reduce stocking rates to increase the average dry matter intake per head which is the most important determinant of productivity.

86. Process: The sub-agreement proposal process varies between sub-agreements but will generally be a two-stage process. In the first stage, the applicants will submit a sub-agreement profile to the Soum Steering Committee (SSC) with a copy to the PMU. If the profile is approved by the SSC for further development, the business units will develop a full proposal. The business units submit the final proposal to the GS, with SSC in copy. The GS makes recommendations to the Project Coordinator to approve or otherwise the proposal.

87. Content: The sub-agreement proposals include a business plan for each of the business units along the value chain, whether they be public or private sector entities. The business plan should include a with- and without-project analysis to show how each unit will benefit from the sub-agreement. For private sector units the business plan should show costs and income, while for public sector units only costs will be relevant. The final business unit in each proposal should either be herders, or downstream processors of livestock or livestock products. The sub- agreement proposal must show how the sub-agreement will contribute to one or more of the three project outputs. The investment analysis takes account of the whole of the investment measured against the contribution to the project outputs, as well as the feasibility of the business plans for each entity in the value-chain. The proposal should show the proposed contributions of each of the entities to the sub-agreement implementation.

88. The period of the business plan may well go beyond the period of the sub-agreement or the period of the project. The business plan should reflect the actual plan to make the business work, including replacement of major capital items.

89. The project loan contribution to the sub-agreement includes provision of civil works, equipment and supplies and services. Where the project loan procures items that fall into various categories of assets, the ownership, and use of such assets, including operation and maintenance, will be determined by government regulations.

90. The business units’ contributions will be the human and physical and financial resources that they can bring to the sub-agreement. The project will not finance salaries of the staff or members of the submitting entities. If business units can raise loans to contribute to the sub- agreement, then they are free to propose as such.

91. The proposal should include a description of the number and type of beneficiaries, how they will benefit, and the system of monitoring and evaluation.

92. The proposal should be signed by any entities who propose to receive project-financed items or services. Depending on the value chain, which is the topic of the proposal, it may need to be co-signed or have a supporting letter from government agencies responsible for regulations or guidelines related to the value-chain.

93. Period of the proposal: The period of the sub-agreement should be sufficient to show the business units making a return on investment, and of sufficient period to be able to show how the investment is contributing to one or more of three project outputs. The period of the business plan should be sufficient to show when major capital items are replaced. Business plans will often extend beyond the life of the project, although obviously there can be no contributions from the project after the end of the project. For private sector units, return on investment is measured in income; for public sector units, the return can be estimated by monetizing against project outputs.

94. The proposal should describe with- and without-project scenarios. It should show investment costs, operation and maintenance, technical support, and income over a period long enough to include replacement of major capital items. The proposal should include the with- and without project analysis of herders downstream from submitting entity. This is to ensure that the sub-agreements impact on herder productivity can be clearly shown.

95. Approval: Upon approval, the sub-agreement proposal becomes a tri-partite agreement between the soum, the project and the entities who submitted the proposal. Sub-agreement proposals should be signed by the submitting entity, with supporting letters from other important stakeholders. Since there will be many similar sub-agreements across the 20 soums, PMU works to aggregate project financial commitments from a number of approved sub-agreements. This includes procurement of civil works, equipment and supplies and consulting and non-consulting services. The consulting firm will sub-contract services, based on the list of pre-approved service providers developed by the PMU.

96. Amendments: While the approved sub-agreements have a specified time period, they can be amended by mutual agreement between the parties to the agreement. The amendment could extend the period of the agreement. The amendment can modify the total budget or budget lines according to internal project guidelines, for example in cases where costs vary from estimates in the proposal.

97. Civil works: The ownership and maintenance of assets and replacement, if necessary, at the end of the asset useful use will be decided according to standard government procedures. In general, buildings and other civil works will be the property of the soum and use of them by private entities will be through rental or other arrangements, such as operation and maintenance and replacement, according to government regulations.

98. Services: The Project Implementation Consultants (PIC) and the JFPR consultants will be the main source of services for each of the sub-agreements. The aimag PIC will assist with aimag coordination.

99. Equipment and Supplies: The project will procure these items according to standard procedures. The ownership of these assets will follow government and project guidelines.

100. The PMU will aggregate the civil works, equipment and supplies and services to be produced across sub-agreements from various soums to facilitate procurement procedures.

101. A central theme across several of the sub-agreements is that the soum authority will be supported by the project to build facilities that will be rented to private sector entities (or user- rights agreement) under arrangements to be included into tripartite agreements between the soum, the entity and herder’s Bagh or Soum Khural representatives (Figure 10). Rental costs should be included in the business plans of the business units. Any income should be included in the business plan of the soum for the relevant sub-agreement. 29

Figure 10: Approach of Soum Renting Facilities to Business Units

Source: TRTA Consultant

102. Monitoring: The soum will appoint a Monitoring Focal Point. The focal point should join a six-monthly monitoring workshop with all soum monitoring focal points from all 20 soums, organized by the PMU M&E officer. The focal points should enter key sub-agreement activity and indicator data into the MIS developed by the PMU. The soum coordinator should submit a 6- monthly and annual report of all sub-agreements being implemented in the soum, according to templates developed by the PMU.

103. Capacity building: Structures and units involved in sub-agreements will have their capacity increased through the processes of developing and implementing sub-agreements. But there will be a need for capacity building driven from the national level, such as training and accreditation programs to support the systems being developed by the subprojects. These activities will be addressed in the capacity building output.

104. Governance. Issues around governance of the value-chains or institutions involved in the sub-agreements will be addressed in the capacity building component, not within the sub- agreements.

3. Subproject Implementation Schedule

105. Subproject and Sub-Agreement Planning and Training Workshop. The project will support a three-day workshop for all PMU and PIC staff to discuss and clarify the subproject and sub-agreement systems and processes. The procedures for sub-agreement proposal development will be agreed for the different types of sub-agreements. The emphasis will be on first-generation sub-agreements, that is PUG/RUA establishment and PUG/RUA implementation. The workshop will also include discussion on sub-agreement processes and content including

business planning and investment analysis. Workshop costs are included under project management (Output 4).

106. Soum Technical Team Training Workshop. The project will support a three-day training course held in Ulaanbaatar. The Consultant and relevant staff from the PMU will train the Aimag Focal Points, and Soum Technical Team (STT) on the project overview, aimag subproject and sub-agreement structures, processes, and M&E systems. As a part of the training, all participants will develop example soum targets and indicators to be aggregated into aimag subprojects. Participants will develop example sub-agreement profiles and proposals, and present to the group. The budget for this activity is in the project management budget (Output 4).

107. Aimag subproject development workshop. The PMU, PIC, STT from all soums and Aimag Focal Points from all aimags will participate in a regional (four-aimag) workshop to agree on the targets for each soum, to be aggregated to an aimag subproject. For budgeting purposes during detailed subproject design, each soum will have one sub-agreement on PUG/RUA establishment. There will be one PUG/RUA implementation sub-agreement per bagh. This will form the basis for targets related to these sub-agreements. However, it will be up to the soums and aimags, in consultation to develop targets for LSU targets and degradation levels. Each soum should have a minimum target of 12% reduction in LSU at the end of the project, and a minimum of 18% reduction in LSU by the time all LSU reductions have taken place according to the RUAs. The budget for this activity is in project management (Output 4).

108. Annual Aimag subproject workshop. The PMU, PIC, STT and Aimag Focal Points will participate in annual workshops to be held in each aimag to report progress on the targets and indicators and to update aimag indicators and targets in light of field experience to date. The budget for this activity is in project management (Output 4).

109. Information Campaign in the soums. After the aimag subprojects are agreed, the STT and PIC will make a concerted effort to make soum stakeholders aware of the objectives and activities of the project, especially those who are eligible to submit proposal for sub-agreements. The project will procure communication materials on the project with contact details and distribute them in the target soums. The budget for this activity is in project management (Output 4). This will include: (i) large signboards in each soum showing the soum targets and indicators; (ii) posters for distribution in soum offices; (iii) leaflets to explain the project to distribute to herders; (iv) hats and jackets with project logo for distribution; and (v) writing pens with project logo, and writing books with project information.

110. Soum authorities and PIC will hold specific meetings and training for entities who are eligible to submit sub-agreement proposals. Eligible entities will need support from the PIC through the process of submission of profiles and full proposals to ensure that they are of adequate quality before submission. The PMU will develop the templates for profiles and proposals. The PIC will be able to inform the submitting entity of the project and submitting entity contributions to the sub-agreement. 31

4. First Generation Sub-agreements

a. PUG /RUA establishment sub-agreement

111. Objective: The objective of the sub-agreement is to establish the organizational structures, relationships and agreements that can lead to sustainable pasture management in the soum. At the heart of these arrangements is that of the PUG, and the RUA that the PUG enters into with the soum government.

112. Structures: The overall structure is summarized in Figure 11. There is an average of 120 herder households per bagh. Each five households form a Khot Ail. Five of the Khot Ails form a Neg Nutag Alliance (each of 25 herders). About five of the Neg Nutag Alliance form a Nutag Pasture Council (each of 125 herders). The Nutag Pasture Council should include all herders in the bagh. There should be six Nutag Pasture Councils per soum. The term PUG is considered to be equivalent to the more traditional term “Neg Nutag Alliance”.

Figure 11: PUG Development Structures and Relationships

Source: TRTA Consultant

113. The neg nutag/usniikhan is the people live in the same ecological environment, where herders together possess the same pasture or water resources, and salt marshes. There are several neg Nutag in a bagh. The khot ail is a few (about five) herder families who stay together and have the same pasture or water sources. The saakhalt ail is the few khot ails or families that live nearby.

114. The key organizational unit is the Neg Nutag Alliance (or PUG) which makes the Rangeland Use Agreement (RUA) with the soum government.

115. Once 80% of herders in a bagh have joined into PUGs/RUAs, they can establish a bagh- level Nutag Pasture Council. Once there are at least two Nutag Pasture Councils, the Soum Pasture Society can be established.

116. The Soum Pasture Management Working Group (SPMWG) acts to bring together the Soum and Bagh Khural, the Soum Pasture Society and the Soum Government. Until the Soum Pasture Society is formed, the SPMWG can operate with the other entities.

117. The Terms of Reference and by-laws, and other functions of these bodies will be developed in the capacity building component of the project in order to be standard across the project area, and be consistent with national practices already in place in other areas of the country, in particular based on experiences of the SDC-supported projects. Structures above the level of aimag will be addressed in the capacity building component of the project.

118. There are 73 pasture-user groups in the project soums. However there appears to be a lack of formal structures and processes in many of them, and lack of RUAs. Given this, the first work of the soums is to establish PUGs in a formal sense consistent with national standards and agree on RUAs. The RUAs should include a both a long-term target for total livestock numbers, numbers of herder households and stocking rates and productivity to match the environment of the PUG grazing area, and the achievable annual and end-of project targets.

119. There are four Soum Pasture Associations (SPA) in the target soum: two in Bulgan (Mogod, Saikhan) and two in Bayankhongor (Jinst, Bogd).

120. A key issue for the project will be to clearly define what is a PUG and what is an RUA, especially since there are many types of herder groups and cooperatives in the project area. In the project, a PUG will be defined as group of herders who have entered into a RUA with the soum that includes: (i) a grazing management plan for the PUG area and soum reserve areas (ii) annual targets over a 15-year period for matching stocking rates to the environment of the PUG grazing area, and a strategy for managing the transition from current stocking rates to the target. In keeping with the approach of the project across all activities, the RUA should include a with- and without-project analysis. As a guide, the RUA should have a target of 80% of initial LSU by the end of year four, with annual targets of 95%, 90%, 85% and 80%. The final LSU should be a minimum of 80% of the starting LSU. (iii) the RUA should include a description of the baseline of the PUG herders, including livestock ownership (species, age and sex), and details of head of herder household (age, gender, education level), and transition plan and target for each herder household.

121. Proposal: The soum government in collaboration with bagh governor (as representative of herders) will develop the proposal. The proposal will describe the activities required to establish the PUGs/RUAS, the Nutag pasture council at the level of the bagh, the soum pasture council at the level of the soum, and the soum pasture management working group (SMPWG). The SMPWG will consist of representatives of the bagh and soum khurals, soum government and soum pasture 33

society. The proposal will specify the civil works, equipment and supplies and services required to support implementation.

122. The sub-agreement proposal should include baselines and targets for key structures and arrangements. These indicators will form the core of reporting and feed into the reporting of against the targets in the aimag subprojects (Table 12).

Table 12: Framework for Targets for PUG/RUA Establishment sub-agreements Indicator Baseline Year 1 Year 2 Year 3 Year 4 Year 5 No. National Pasture /PUG Society meetings No. Aimag Pasture /PUG Society meetings No. Soum Pasture /PUG Society meetings No. Nutag Pasture Council (bagh/PUG) functioning No. PUGs/RUAs signed Source: TRTA Consultant

123. The activities in the sub-agreement will be led by the soum land manager in close collaboration with SAU and include: (i) Awareness raising among herders and traditional grazing management (ii) Baseline survey of PUGs/RUAs and other relevant structures and arrangements (iii) Soum and bagh authorities will facilitate a series of meetings, workshops and site visits with groups of herders that the bagh considers are likely, due to their traditional grazing areas, to be interested in forming into PUGs, and then developing RUAs. Initial meetings will be with large numbers of herders but will then break up into smaller groups of herders who are likely to join into individual PUGs/RUAs. (iv) Establishment of PUGs and related organisational capacity building, including PUG registration (v) Ecological Site Description (ESD) mapping and rangeland assessment of PUG grazing area (vi) Estimate carrying capacity of PUG area and PUG area mapping (vii) Development of Rangeland Use Agreement. The RUA describes grazing management and transition to stocking rate targets that are matched to carrying capacity. The RUAs should cover a 15-year period.

124. Services: Consultants provide technical support to sub-agreement development and implementation.

125. Equipment and supplies. The sub-agreement will include provision for training and information materials and supplies related to PUG/ RUA development.

126. Civil works: There are no civil works envisaged to be needed in the sub-agreement.

127. Period: The sub-agreement proposal should cover the whole period estimated by the

soum/baghs to be able to reach the targets for PUGs/RUAs as stated in the aimag subproject. Given the time to establish PUGs/RUAs, the period should be at least three years.

128. Investment analysis: The sub-agreement is non-income generating and the output cannot be monetized so there is no need to do an investment analysis. However, an estimate of cost per PUG/RUA should be calculated as simply the total cost of the sub-agreement divided by the expected number of PUGs/RUAs.

129. Approval process: The sub-agreement proposal should be submitted directly to the Grants Secretariat of PMU with a cover letter from the Soum Steering Committee.

130. The services should include the entering into national databases related to PUGs registration, ESD mapping, PUG area mapping, stocking rate estimates, and adjustments, and RUAs.

131. Potential scope of the PUGs/RUAs: There will only be one PUG/RUA development sub- agreement per soum. Assuming an average of 25 herders per PUG/RUA and that 80% of herders will join, then there is scope for 466 PUGs/RUAs in the 20 soums. These figures are shown in Table 13. This could vary during implementation, with the baseline suggesting up to 585 PUGs may be needed in the 20 project soums. The establishment of the PUGs and RUAs will be a major effort for the project. The existing pasture-user-groups could prove to be a basis on which to start.

Table 13: Scope of PUG/RUA development Items Bulgan Arkhangai Bayankhongor Uvurkhangai Total No. Herder households 2,759 4,894 3,637 3,286 14,576 No. PUGs/RUAs 88 157 116 105 466 Average no. herders per 25 25 25 25 25 PUG/RUA No. Herders in PUGs/ RUAs 2,376 4,925 3,077 2,578 12,956 % of herder households in 80% 80% 80% 80% 80% PUGs/RUAs % of pasture area covered by 80% 80% 80% 80% 80% PUGs/RUAs Source: Consultant’s estimates

132. While the PUGs/RUAs are the basic building block for improved grazing management, it is also important to develop other structures. The number of organizations and of herder household members is shown in Table 14.

Table 14: Herder numbers in Structures related to PUGs/RUAs Herder Herder Household Household Unit Number Members Members (no./unit) (no.) Aimag Pasture Association 4 3239 12,956 Soum Pasture Society 20 648 12,956 Nutag Pasture Council (Bagh level) 120 108 12,956 Neg Nutag Alliance / Pasture User Groups 585 22 12,956 Khot ail 3,000 5 2,932 Herders 14,659 1 14,659 Source: Consultant’s estimates

b. PUG/RUA Implementation Sub-agreement

133. Objective: Herders who have joined into PUGs/RUAs have improved productivity through improved grazing management, stocking rates and herd structures.

134. Justification: Support is needed to implement the RUAs and the implementation sub- agreement embodies some of the incentives that provide motivation for herders to form into PUGs and develop RUAs.

135. Proposal: The sub-agreement proposal should be submitted by the business units involved in implementation: a grouping of a minimum of five PUGs/RUAs in a contiguous area, preferably within one bagh; the soum land manager; and the SAU.

136. While there is scope for 585 PUGs/ RUAs in the project soums, it would be impractical to have this many sub-agreements. Ideally, the sub-agreement proposals would be lumped at the level of the bagh Nutag Pasture Council. This would suggest that a single sub-agreement would consist of five PUGs. If PUGs from more than one Nutag Pasture Council could be lumped with another, this would be acceptable. Preferably, PUGs from different baghs would not be included into the same sub-agreement proposal. The proposal should be co-signed by Nutag Pasture Council, the Soum Pasture Council, and the Soum Pasture Management Working Group (SMPWG), the soum land manager and SAU.

137. The proposal should include a business plan for each of the individual PUGs/RUAs. It should describe the civil works, equipment and supplies and services required to support implementation. If the PUGs/RUAs wish to put in place a system of grazing fee collection and use, this should be included in the business plan. The business plan will be based on the RUA.

138. 1. Targets: The sub-agreement proposal should include baselines and targets for key indicators. These indicators will form the core of reporting and feed into the reporting of against the targets in the aimag subprojects (Table 15).

Table 15: Framework for Targets for PUG/RUA Implementation PUG/ RUA ID:……………………. Indicator Baseline Year 1 Year 2 Year 3 Year 4 Year 5 Livestock Units in PUG/RUA % carrying capacity No. herders in PUG/RUA Grazing fees collected (TG) No. productivity-monitoring herders Herder-livestock gradient % sheep units as goats % ewes in sheep flocks Degradation level of PUG area (1-5) No. wells in PUG area No. wells with O&M functioning No. new wells No. livestock houses improved No. rodent control actions Source: TRTA Consultant

139. Activities: The sub-agreement activities include: (i) Herders sell livestock to reduce stocking rates according to the provisions of the RUA. (ii) Herders change herd structures to reach agreed targets in the RUA (iii) The soum land manager monitors the environmental status of the RUA grazing areas, incorporating into local and national database systems, and feeding back to herders. (iv) Soum technical team conduct extension activities (meetings, workshops, extension materials) to herders on the factors affecting productivity and profitability, with the objective of herders moving to higher levels of productivity through improved herd structures, feeding, breeding and health, and better livestock and livestock product turnoff. The team collects and analyses data from the livestock weighing and assists in livestock weighing. (v) Herders reporting on livestock numbers (species, age and sex) according to reporting schedule in the RUA. (vi) design and implementation of a water access improvement plan including operation, maintenance and use of existing wells, rehabilitation of wells, and construction, operation, maintenance and use of new wells. (vii) design and implementation of a livestock housing improvement activity including upgrade of existing housing and construction of new housing; including housing design to make animal identification and weighing and condition scoring easier. (viii) herders in PUGs pay grazing fees if decided as an internal issue for the PUGs. (ix) Meetings of the Nutag Pasture Council (bagh/PUG), and Soum Pasture /PUG Society. (x) Defining and managing soum reserve pasture areas

140. Services. Consultants provide technical support to sub-agreement development and implementation.

141. Equipment and supplies: The sub-agreement can include: (i) For Land Manager: Cameras for expanding photographing of sites for environmental monitoring; computers and IT systems (ii) For PUG herders: Digital hanging scales for weighing lambs, kids and feeds for all PUG herders (iii) For PUG herders: Herd productivity technical information and record books (iv) For a group of PUG herders: Ear-tags for all goats and sheep in three flocks which are representative of the flocks (i.e. large, medium, small flocks) within the PUG at the start of the RUA; ear-tags for all new born lambs and kids in these same flocks; weighing scales for these flocks (v) For all PUG herders: Digital hanging scales for weighing lambs, kids and feeds for all PUG herders (vi) For all PUG herders: materials for improving winter housing; hayfield fences 37

(vii) For herders and SAU: Well operation and maintenance technical information and record books (viii) For herders: Well repair parts, hay/fodder making equipment (ix) For SAU and herders: Livestock housing technical information booklets (x) For SAU and herders: Rodent control technical information book (xi) For soum reserve areas: deep wells, animal shelters, signboards

142. Civil Works: The sub-agreement can include: (i) an office and for a soum PUG association. The office is owned by the soum, but a rental agreement can be organized with the PUG. (ii) New wells for PUGs

143. Period: The sub-agreement proposal should cover the whole period estimated to complete the activities.

144. Investment analysis: The sub-agreement investment analysis should include all costs one side, and return measured in an estimate of increased productivity due to stocking rate reduction. This calculation will be automatically generated based on models developed by the PMU.

145. Approval process: The sub-agreement proposal should be submitted to the Soum Steering Committee with a copy to the PMU. Once cleared by the SSC, the proposal should be sent PMU with SSC in copy.

146. Potential scope of the sub-agreements: Ideally, if there were one PUG/RUA implementation sub-agreement per bag, this would make about 120 sub-agreements. While this may sound high, it will be up to the PMU to make the templates and standardized procedures to make it work.

5. Second Generation Sub-agreements

a. Private Veterinary Unit (PVU) Sub-agreement

147. Objective: The objective is to strengthen the organizational structures, relationships and agreements that can lead to improved animal health in the soum and strengthen one health linkages and processes. These are shown in Figure 12.

Figure 12: Structures and Relationships in Animal Health

Source: TRTA Consultant

148. Structures: At the heart of these arrangements is the PVU which has a tripartite agreement with the soum and herder representatives to provide services. The PVU also has contracts with the government to deliver vaccines.

149. Justification: Animal health services are critical for improving productivity and detecting any disease that could be harmful for animals and humans. Project investment is justified to improve quality and quantity of services. Linkages between local level

150. Proposal: The sub-agreement proposal pertains to a whole soum and should be submitted by the soum, co-signed by the SVU, the AVD, the existing PVUs and bagh governors representing herders. The proposal should have a supporting letter from the GAVS confirming that the proposal is consistent with provisions of the Animal Health Law and related guidelines.

151. There are four business units involved in the provision of animal health services that can be included in a sub-agreement: (i) The soum authority which enters into contracts for PVU to supply veterinary services in the soum and is responsible for operational funding of the SVU. (ii) Soum Veterinary Unit. (iii) Private Veterinary Units (PVUs) in the soums who provide vaccination and treatment services to herders. (iv) Herders. Herders are responsible for managing their livestock. They receive mandated services such as vaccination from the PVU, and request user-pays 39

treatment services from the PVUs. Herders keep animal health records in a standardized booklet.

152. The proposal should include business plans for the four business units for an eight-year period. The proposal should strengthen each business unit linkages between them. The proposal should show the with- and without- project analysis for each business unit.

153. Targets: The sub-agreement proposal should include baselines and targets for key indicators (Table 16). These indicators will form the core of reporting and feed into the reporting of against the targets in the aimag subprojects.

Table 16: Targets for Animal Health PUG/ RUA ID:……………………. Indicator Baseline Year 1 Year 2 Year 3 No. PVUs functioning No. herders per PVU No. livestock per PVU No. herders with Animal Health cards completed with good quality No. PVUs assessed as reaching GAVS standards MAHIS functionality as assessed by GAVS (1-5) Source: TRTA Consultant

154. Activities: The activities in the sub-agreement include: (i) The SVU conducts activities and collects data to enter into the MAHIS. (ii) The PVUs provide services including vaccinations and treatments. The PVUs keep accurate vaccination records with updated technology and submit to AVD to trigger payment of vaccination contracts. (iii) Herders complete accurate Animal Health Records of updated design. The records are of vaccinations and preventive parasite treatments and treatments carried out by the PVU. (iv) Workshops and meetings between PVUs, SVU and soum level health services on one health issues

155. Services. Consultants provide technical support to sub-agreement development and implementation.

156. Equipment and supplies: The sub-agreement can include: (i) For SVU: Computer systems and IT systems for data management meetings via internet; Computers and IT systems; (ii) For PVU: equipment and supplies for vaccination, parasite medicine delivery, and sample collection; marketing materials; and (iii) For herders: technical booklets on animal health; updated Animal Health Record books. (iv) For aimag veterinary department: computers to support data management

157. Civil Works: The sub-agreement can include: (i) For PVUs: upgraded buildings, office space, storage facilities and computers and IT. (ii) For SVU: Building for vaccine storage, including vaccine storage units.

158. Period: The sub-agreement proposal should cover the whole period estimated to complete the activities. It is expected that the period should be at least three years.

159. Investment analysis: The sub-agreement investment analysis should include all costs one side, and return measured in an estimate of increased productivity due to improved animal health. This calculation will be automatically generated based on models developed by the PMU. The analysis should also take into account the business plan of PVUs.

160. Approval process: The sub-agreement proposal should be submitted to the Soum Steering Committee with a copy to the PMU. Once cleared by the SSC, the proposal should be sent to PMU with SSC in copy.

161. Potential scope of the sub-agreements: There is scope for one sub-agreement in each soum. It is assumed that all PVUs in each soum will enter into the sub-agreement proposal. It is critical that there is good coordination between the project and the World Bank-funded Livestock Competitiveness Project (LCP), which is investing heavily in animal health and veterinary services. The LCP is working in three of the four aimags: it is not working in Bayankhongor aimag.

b. Private Livestock Marketing Unit (PLMU) Sub-Agreement

162. Objective: The objective of the sub-agreement is to establish the organizational structures, relationships, agreements and processes that can lead to an improved sheep and goat marketing system.

163. Structure: At the heart of the structure is a Private Livestock Marketing Unit (PLMU), which operates a livestock exchange facility owned by the soum and constructed with the support of the project. The PLMU has an agreement with the soum to operate the facility. In the project, the only eligible entities to submit a proposal to develop such a facility is a herder cooperative made up solely of members who have entered in to PUGs/RUAS, or a PVU registered in the soum, or Private Feeds Unit registered in the soum (see sub-agreement on Feeds).

164. Other structures relate to vertical and horizontal linkages at soum, aimag and national level allowing for information exchange and raising and solving issues on technology, governance, policy and so on (Figure 13).

Figure 13: Structures and Relationships on Livestock and Meat Marketing

Source: TRTA Consultant

165. Justification: There is an opportunity to reduce livestock trading transaction costs and establish downstream linkages to processors if there is a central location for livestock for pre- processing before transport to markets. The pre-processing will depend on processor specifications, but could include weighing, ear-tagging, health checks and health certification. This process will be useful for herders who have joined into PUGs/RUAs who will need to sell livestock to reach targets for livestock population and stocking rate reductions, as well as other herders in the soum. This is a potential business opportunity for a herder cooperative to market their own livestock through this channel, and potentially charge fees (on cash or livestock-barter basis) for other herders if it can be shown to be advantageous. If successful, a regulatory framework could be established to support livestock marketing through such a channel. This policy and regulatory work will be addressed in the capacity building part of the project.

166. Proposal: The proposal should be submitted by five entities: the entity wishing to establish and manage the PLMU (e.g. herder cooperative or who have agreed PUGs /RUAs, and formed cooperatives), the soum, suppliers (e.g. herder cooperatives or PUG/RUAs herders), livestock processors who will process the livestock marketed through the PLMU for at least one selling season, and SVU. The proposal should include a business plan for the business units involved. The period of the business plan should cover at least five years, and include provision for replacement of capital items.

167. Targets: The targets for Marketing are shown in Table 17.

Table 17: Framework for Targets for Livestock Marketing PUG/ RUA ID:……………………. Indicator Baseline Year 1 Year 2 Year 3 # PLMU functioning # herder cooperatives functioning # sheep to be marketed through facility # sheep not to be marketed through facility Source: TRTA Consultant

168. Activities: The activities include (for one cycle of livestock trade after the civil works) are: (i) Soum constructs a livestock trade facility at the soum with fencing, feed and water troughs for sheep, and yards with facilities for identification, weighing, and loading onto trucks. An office for storing equipment and supplies and meeting room and office with computer and IT systems. Herder cooperatives can rent the facility according to an agreement with the soum. (ii) Herders enter into a cooperative agreement to market their livestock in a planned fashion, to meet the specifications of processors in terms of quality, timing and condition, and to agree on a price structure, and carcass quality feedback. (iii) Agreements made with registered processors on logistics and price indicators through facilitation of the project, in form of tripartite agreement with herders, PLMU and soum (iv) SVU provides technical support to compliance with processor specifications on livestock health inspection and certification and animal identification (v) Herders bring livestock to exchange facility, the sheep are weighed, ear-tagged and checked for health by SVU, health certificates. Livestock are fed for a short period, if necessary, until the processor brings trucks to collect the livestock. Livestock data is managed by the PLMU and the SVU as per regulations. The LPMU sends livestock data to the processor. (vi) The transporter checks the eartags and manages the data according to regulations and sends data to the processor as per agreements made. (vii) Processor reads the eartags, manages data according to regulations, slaughters livestock and grades carcass according to standard procedures. Sale money is paid into the account of the cooperative, with a portion to SVU and/or soum account and PLMU according to guidelines and agreements. Cooperative and soum meet to sign off on completion of the agreement. (viii) Processor provides feedback on carcass weights and quality as specified in the agreement with herders, and according to standards (ix) Herder cooperate meets to decide on income-sharing (x) Operation and maintenance of the facility according to the agreement of the soum.

169. The expected number of livestock trades per year, the timing and volume of sales should be specified in the proposal. The proposal should also include provision for maintenance and repair of the facility. The facility will be used primarily for sheep and goat trading but can include facilities for cattle by mutual agreement.

170. Services: Consultants provide technical support to sub-agreement development and 43

implementation.

171. Equipment and Supplies: The project will supply: (i) eartags, eartag applicators, weighing scales, according to the needs of suppliers and existing regulations (ii) Manuals on livestock facility maintenance and on technical issues related to livestock trade and slaughter (iii) Computers and IT set up for the PLMU office

172. Civil Works: The project will support construction of the livestock trade facility. The size of the facility will depend on soum estimation of the demand for the facility, which will be specified in the proposal.

173. Period: The period of the sub-agreement should be five years.

174. Investment Analysis: The investment analysis will depend on the business plans of the herder cooperatives (suppliers), the soum, the PLMU managing the facility, and the SVU.

175. Approval process: The sub-agreement proposal should be submitted to the Soum Steering Committee with a copy to the PMU. Once cleared by the SSC, the proposal should be sent to PMU with SSC in copy. The sub-agreement will be a tripartite agreement between the herder cooperative, the soum and the processors.

176. Governance: A number of regulations are currently being developed for the meat value chain from production through to transport, slaughter and consumption. The sub-agreement details will naturally have to follow these regulations as they come into force.

c. Private Feeds Unit, Herder Feeding and Private Feedlot Unit Sub- agreement

177. Objective: This sub-agreement aims to establish the organizational structures, relationships, agreements and processes at the soum and aimag levels that can lead to a functioning value-chain with five main components: (i) Private Feeds Unit (PFU) based in the soum that can supply feeds to meet the demands of herders in the soum; (ii) a sufficient demand for the feeds from herders and herder cooperatives; (iii) a Private Feedlot Unit (PFLU); and (iv) processors who will buy fattened lambs (v) the soum that rents facilities to the PFU. It is important to note that the Private Feedlot Unit (PFLU) can in practice be integrated into the Private Livestock Marketing Unit (PLMU). The two functions could be merged into one facility. This will need to be worked out during implementation and could vary from soum to soum.

178. Structures: The most important structure in the supplementary feeds supply chain is the Private Feeds Unit (PFU). The PFU has an agreement with the soum. The structures are shown in Figure 14. The sub-agreement will support the establish and function of structures at the soum and aimag level. These include a Soum Feeds Working Group, and Feeds Associations at Aimag level. These bodies serve to act as information sharing bodies on technical, governance and other issues as they arise.

Figure 14: Structures and Relationships for Feed-Livestock-Markets

Source: TRTA Consultant

179. A second important structure is the Private Feedlot Unit (PFLU). The PFLU has a tripartite agreement with the soum and herder representatives (e.g. bagh authorities). The agreement includes the user-rights for a feedlot facility owned by the soum and constructed through project support. The PFLU can join the structures outlined in the Livestock Marketing Sub-Agreement description, as can the processors.

180. Other structures include those that promote horizontal and vertical information-sharing - a soum feeds working group, an aimag and national feeds association. A link to policy makers is through a national consultative committee on animal feeds.

181. Downstream processors of fattened lambs are also important structures.

182. Justification: There is potential for demand for feeds for livestock for winter survival, late- pregnancy feeding of ewes and does, and lamb fattening but there is generally lack of an enabling environment for investments to meet this demand. The demand for lamb fattening by herders assumes there is a demand for fattened lambs by processors. The work, to be conducted in parallel, aims to establish a PFU, to create the demand from herders; and to create the link to downstream processors of fattened lambs.

183. Proposal: The proposal should include business plans for all the business units in the value-chain a five-year period, or at least until the replacement of major capital items – for example a tractor and related equipment. The proposal should also show business plans for business units that will buy items or services from the PFU – the herders, herders cooperative, and male flock managers. If in any soum, the demand for fodder cannot be met by local production by herders or the PFU, then fodder suppliers outside the soum can be included as a business unit. If this business unit is at the aimag, then coordination with sub-agreements in four project soums will be needed.

184. Business Units: The business units in the proposal, as shown in Figure 15, can include: 45

(i) PFU: Private feed producers or traders in the soum. These may produce fodder (e.g hay/silage), process fodder into feeds such as pellets, or procure other feeds such as bran, mineral and vitamin supplements for on-selling to herders. (ii) Herders: Herders acting largely as individuals who procure the various types of feeds, and may have fodder-growing plots themselves. As individual herders they can feed their livestock over winter to improve survival, or specifically to late pregnant ewes and/or does to improve birthweights, mothering ability and milk production. There are also some other minor options such as feeding horses, or cattle and yaks. Herders who have fodder plots, and fodder storage facilities (these could be the same as the herders who do feeding). Herders who have joined into a cooperative for fattening lambs (autumn). It is unlikely that individual herders will engage lamb fattening due to economies of scale issues with management and marketing. (iii) A Private Feedlot Unit (PFLU) that uses the soum-owned feedlot facility under a tripartite agreement with the soum. The linkage between the PFLU and herder cooperatives who wish to fatten lambs will be an important one that has a number of potential business relationship options. (iv) The soum who owns the feedlot facility and has an agreement with the PFLU. (v) Processors who would buy fattened lambs. Winter feeding or feeding pregnant ewes does not have a direct connection to the market.

Figure 15: Fodder-Livestock- Market Value Chain

Source: TRTA Consultant

185. The feed supplier outside the soum is also a business unit engaged in the value chain. If there is a high level of interest in the soum for feeds, and the local supply falls far short of demand, these feed suppliers could be involved in the sub-agreement.

186. Activities: (i) SAU and SVU: to provide technical support including data management and performance recording; establish a lamb fattening facility for rental by the herder cooperative; establish a fodder storage facility for rental by the PFU.

(ii) The soum should also confirm its role on fodder supply; as to whether it will act as a competitor to the PFU at any point in fodder supply. (iii) PVU: To provide veterinary services to the herders (iv) PFU: To establish fodder plot to produce fodder, process feeds (e.g. pellets, silage) or procure feeds to meet herder demand (v) Herders cooperative to fatten lambs. Collect lambs from members to fatten at feedlot site in October under arrangements made with the PFLU; procure feeds; arrange market for fattened lambs; keep technical and financial data and provide feedback to the PFU. Market lambs in mid-November. (vi) Herder feeding: Individual herders to feed late-pregnant ewes or does. Buy feeds and manage feeding; identify sheep and keep records for performance recording. (vii) Male flock managers to feed breeding males before mating. Buy feeds and manage feeding; identify sheep and keep records for performance recording. The purpose of this feeding is that males are in good condition before mating, with good quality and quantity of semen production. (viii) Individual herders to feed livestock over winter; buy feeds, goats and sheep should be condition scored to assess those most at risk and given more feed. (ix) Individual herders produce and store fodder. Herders identify a 1 ha area to produce fodder; or identify an area for pasture hay, and receive support to grow fodder. A representative spread of herders over quintiles should be used for feeding. (x) Processor – lamb buyer: Enter into agreement with lamb fattening cooperative; provide feedback on carcass after slaughter

187. The system of fees paid to the PFLU by the lamb fattening cooperative and by the PFLU to the soum will be an important part of the business plans in the proposal. The system should allow for a lower fee scale for cooperatives of herders in PUGs/RUAs compared to other herders. This acts as part of the incentive system for herders to enter into PUGs/RUAs.

188. Services: Consultants provide technical support to sub-agreement development and implementation.

189. Equipment and supplies: These include: (i) For PFU the project will support fodder plot fencing and water supply (e.g. deep well), a tractor and related attachments, equipment for feed processing and hay making, a water tank, and sprinklers for irrigation. (ii) For PLFU the project will support eartags and weighing scales. (iii) The project will supply record books for PLFU.

190. Civil Works: The project will support: (i) construction of a lamb feedlot facility, the capacity of which will depend on the proposal, including well, feeders, water troughs, feed and equipment storage and office, fence and water supply for a fodder plot. The feedlot is a soum asset that can be rented by the PFLU. 47

(ii) For PFU: office and feeds processing and storage building. The fodder storage facility is a soum asset that can be rented by the PFU. The PFU office including a meeting room, and a building for feed processing will be an asset of the soum for rent by the PFU. A deep well for water supply.

191. Period: The sub-agreement proposal should cover at least five years.

192. Investment analysis: The sub-agreement investment analysis should include business plans for all the business units in the sub-agreement.

193. Approval process: The sub-agreement proposal should be submitted to the Soum Steering Committee with a copy to the PMU. Once cleared by the SSC, the proposal should be sent to PMU with SSC in copy. The sub-agreement is a tripartite agreement between the soum, the project and the business units who submitted the proposal.

194. Scope: About 800,000 lambs are born each year in the project soums, at an average of 40,000 per soum. At current herd structures, it can be estimated that 100,000 of these lambs are sold each year, at an average of 5,000 per soum. If 50% of herders are interested in joining a lamb fattening cooperative, then 2,500 lambs could be fattened per year on average from the project soums. While the initial sub-agreement is to establish a 500-lamb feedlot, there is potential to expand if successful. Assuming lambs grow at 150 grams per day for 40 days, the weight gain is 6 kg, which require about 42 kg of dry matter feed – a combination of roughage, grain and minerals - at a conversion ratio of 7:1. For 500 lambs, a total of 21 tons of feed would be required, as well as good supply of drinking water. The planning and implementation process will show what will be the limiting component of the value-chain.

195. The potential market for late-pregnancy supplementary feeding remains to be determined. The most likely market is for ewes in relatively poor condition. Of the 1.1 million ewes and 760,000 does mated each year, 70-80% become pregnant. Assuming 20% of ewes are in poor condition, this makes a potential demand for about 200,000 ewes to supplementary feed, or 10,000 ewes per soum on average. Whether livestock herders in different herd-size quintiles are interested in feeding is yet to be determined. Whether herders will simply use whatever fodder they have access to from their own production, or whether they will be interested in buying feed, is also an open question.

196. Feeding ewes at 1% of bodyweight per day in dry matter for 40 days, will require about 18 kg of feed per ewe, or 1.8 tons per 100 ewes; about 1.2 tons will be needed for 100 does. Herder interest in feeding ewes or does will depend on their attitudes and prices during implementation. Without an ultrasound pregnancy test, it is not possible to accurately differentiate pregnant and non-pregnant ewes and does as they enter the last six weeks of pregnancy, so there will be some losses due to feeding non-pregnant ewes.

197. The best response to feeding will be shown by ewes in poor condition, or maiden ewes which may be poor mothers if they are in poor condition; feeding these ewes has an element of survival feeding for both ewes and unborn and newly-born lambs as well as a production response. Amongst herders, it is more likely that herders with above average size flocks will be more interested in feeding than those with smaller flocks who are less interested in productivity gains, and who have less to spend on feed.

198. The demand for winter feeding would be expected to be very high in dzud years, with

expected high prices for feed, and access problems. This will also need to be estimated during sub-agreement proposal development.

d. Private Animal Breeding Unit (PABU) Sub-agreement

199. Soums can submit one sub-agreement proposal for a Private Animal Breeding Unit (PABU), from which they can one of three options, namely (i) Sheep Nucleus Flock PABU (ii) Goat Nucleus Flock PABU (iii) Sheep Terminal Sire Flock PABU

200. Sheep Nucleus Flock PABU: Objective: The objective of the sub-agreement is to establish the organizational structure, relationship, agreement and process at the soum and aimag levels that can lead to sustainable sheep or goat breeding improvement in the soum. At the heart of these arrangements is the Private Animal Breeding Unit (PABU) and the agreement that the PABU has with the soum government. The relevant structure is shown in Figure 16. Structures above the level of aimag will be addressed in capacity building.

Figure 16: Sheep and Goat Breed Improvement Structures and Relationships

Source: TRTA Consultant

201. Structure: The key organizational unit is the PABU which makes a tripartite Sheep/Goat Breeding Improvement Agreement with the soum and herder representative (e.g. bagh authority). By this agreement, the PABU gets access to public sector support. This unit manages a nucleus flock that produces improved breed males (rams or bucks) for use by herders, and for use by their own nucleus flock. The nucleus flock should be large enough (e.g. 1,000 ewes/does) to be able to supply a significant number of males. In practice, it is likely that such a flock will actually be 49

made up of several physically separated individual flocks. The PABU also manages a male flock which comprises young males before they are distributed to herders and some of the males from the herders during the non-mating season. The template for the Sheep/Goat Breeding Improvement Agreement should be developed by the Livestock Genetic Resources Centre to ensure consistency with national standards and processes.

202. For sheep breeding one PABU with 1,000 ewes can provide improved rams for about 20,000 ewes There is an average of about 700 herders and 64,000 breeding ewes per soum in the project area. Therefore, there is scope for more than on sheep PABU per soum. For goat breeding one PABU with 1,000 does can provide improved rams for about 15,000 does assuming the nucleus flock will produce 300 ram lambs each year of which about 12 will be retained for the nucleus flock, 120 available for mating to herders and 168 culled. Under these assumptions, there is a potential scope for 55 goat PABUs in the project area. However, given the current level of experience it is considered prudent to start with establishing a single PABU for sheep or goats in each soum in order to get experience in understanding the market for rams.

203. The Soum Breed Improvement Working Group is a structure that brings together the Bagh and Soum Khurals, the soum government and the PABUs in the soum (including those involved with sheep and goats, but also cattle if there is any breed improvement activity). This is an opportunity for information sharing on breed improvement.

204. Aimag and national PABU associations aim to strengthen the PABUs. The aimag can also have a Working Group structure. There are four project aimags, and under the project a “regional” or four-aimag structure can be established. At the national level, the National Consultative Committee on Animal Genetic Resources, established under the Animal Genetics Law, is the forum for exchange between the Livestock Genetic Resources Centre, meat and wool sector companies and PABU associations. This structure is important in discussing breeding objectives and overall structures of breeds and genetic improvement strategies.

205. The Terms of Reference and by-laws, and other functions of these bodies will be developed in the capacity building component of the project in order to be standard across the country.

206. Justification: The establishment and operation of sheep and goat breed improvement programs based on PABUs requires public sector support because the system requires a high degree of technical input, as well as significant start-up costs. Project support for such a system embodies some of the incentives that provide motivation for herders to form into PUGs and develop RUAs.

207. Proposal: The sub-agreement proposal should be submitted by the members of the PUGs who are interested in establishing the system, co-signed by relevant bagh authorities, and the SAU and SVU. The proposal should have a supporting letter from the Livestock Genetic Resources Centre confirming that the proposal is consistent with provisions of the Genetics Law and related guidelines. The proposal describes the activities of the sub-agreement. The proposal should describe the civil works, equipment and supplies and services required from the project to support implementation.

208. There are five business units in this value chain in the soum. These are: (i) Private Animal Breeding Unit (PABU), a cooperative of herders.

(ii) Herders who buy (or rent) the improved males. They mate the males to the females in the breeding season, then return the males to the PABU male flock for the non- mating period. (iii) Male flocks (not belonging to PABU) where some herders may put the males into other bagh-level male flocks if they prefer. (iv) SAU and SVU provide technical and operational support to the activities of the PABU, especially for animal identification and performance recording, and non- PABU male flocks, (v) PVU provides animal health services

209. There are a range of business models that can be used for the PABU. The PABU can manage the nucleus flock as a private business, with rams being sold or rented out on the open market. There can be alternative business models, such as herders who wish to plan ahead to buy or rent improved males can join a cooperative to “book” males in advance. Such herders are termed “base flock herders”.

210. In a “closed nucleus flock” model, the sub-agreement proposal should name from 1-5 herders who between them should have 1,000 breeding ewes/does to register in the nucleus flock, with a minimum of 150/does ewes from any individual herder. At a mating ratio of 40:1 this means there will be about 25 rams in the nucleus flock. Selection of the initial rams for the nucleus flock is an important activity. The proposal should nominate one herder as the nucleus flock coordinator, the other herders are termed nucleus flock managers. The coordinator and managers together make up the PABU. In technical terms, this is called a dispersed nucleus flock because several physically separate flocks make up the nucleus flock. The reason for this is that there are very few, if any, herders that have 1,000 breeding ewes/does. Decisions on the number of ewes/does and number of physical flocks in a nucleus flock can be made on a case-by-case basis depending on local conditions.

211. It is important that the performance of sheep/goats in the nucleus flock is able to be compared with individuals in other flocks. For example, introducing rams from other nucleus flock in similar environments may add a degree of hybrid vigor. As time goes on, a “three-tier” breed improvement system can be established by the selection of elite animals for establishment in an Elite Nucleus Flock. While steps can be made in this direction, it is unlikely such a flock will be established during the life of the project.

212. An “open nucleus flock” model is the same as the closed nucleus except that the nucleus flock is managed in a cooperative structure, as a so-called “Group Breeding Scheme”. In the scheme, cooperative member herders who have the ”base flock”, contribute their best performing ewes/does to create a nucleus flock, a proportion of second-grade culls from the nucleus flock can be returned to members, and members receive rams from the nucleus flock at a discount rate. To reach a worthwhile selection pressure on females, the ratio between the base flock ewes/does and nucleus flock should be about 20:1. An open nucleus flock results in more rapid genetic gain than a closed flock, and there can be advantages in the social and technical linkages between the base-flock and nucleus herders. There would be more pressure on the base flock to have good health since they contribute ewes/does. The disadvantages are the high transaction costs and time in developing the group breeding scheme, and health risks from contributing livestock.

213. The proposal should include a business plan including with- and without-project analysis 51

over a ten-year period for the three business units. A key part of the analysis for the PABU will be the value-added income of selling (or renting out) a portion of young entire males for breeding as opposed to castrating them and selling them for meat. This requires a market description of the quantity and price demand for improved rams. The business plan for herders should include a with- and without-project analysis of herder productivity and incomes who use or do not use the improved ram or have access to an improved male flock.

214. The essential component of a breed improvement program based on selection is accurate performance recording data to identify superior-performing males, and to lesser extent females.

215. It is important that the various flocks that make up the nucleus flock are managed under as similar conditions as possible, especially in relation health, grazing and feeding, so that lambs from each flock can be fairly compared when they are ranked. This will be an important job for the coordinator and flock managers. Each flock manager should have a flock management record book to keep records of feeding and health, and flock dynamics (e.g. mortality and sickness). The coordinator will play an important role in harmonizing performance recording and decisions on ranking across the several separate physical flocks that make up the nucleus flock.

216. There would not be expected to be any specific changes to marketing of livestock processors as a result of the breed improvement program, so processors are not included as a business unit. However meat and fiber, and to a lesser extent skin processors will have an important role in the National Consultative Committee on Animal Genetic Resources as they engage with the LGNRC on breeding objectives for sheep, most importantly the balance in the breeding objectives between meat and wool, and engagement on objectives in relation to carcass and meat quality.

Figure 17: Detailed Structures of Sheep/Goat Breed Improvement

Source: TRTA Consultant

217. Targets: The sub-agreement proposal should include baselines and targets for key indicators (Table 18). These indicators will form the core of reporting and feed into the reporting of against the targets in the aimag subprojects.

Table 18: Targets for Sheep Breed Improvement PUG/ RUA ID:……………………. Indicator Baseline Year 1 Year 2 Year 3 # nucleus flock established # ewes in nucleus flock # flocks in nucleus flock # male flocks with improved rams # rams distributed from nucleus flock % of ewes mated to rams from nucleus flocks Source: TRTA Consultant

218. Activities: The activities of the PABU include: (i) Registration of the PABU by the Livestock Genetic Resource National Centre and Sheep Breeding Improvement Agreement with the Soum (ii) Construction of an office building and equipping with computers and IT system, printers, desks, chairs, meeting table and whiteboards. (iii) Identification. All livestock in the nucleus flock will have an electronic ear-tag based on a national standard system for breed improvement. 53

(iv) Performance Recording. The managers will carry out animal performance recording. Animal weight is the main piece of data to collect on lambs. The managers will weigh and ear-tag all male and female lambs at birth, record the birth date and weight and identify mothers, and record whether they are twins. It will usually not be possible to identify the individual ram parent due to mating in multiple ram flocks, but the ram parents in the flock can be recorded. The lambs will be weighed in summer and again in October. It can be assumed that with an 80% reproductive rate there will be 400 female and 400 male lambs/kids. In summer, only those males identified as especially inferior – maybe 10% or 40 lambs will be castrated. The performance data will be entered into a database consistent with national standards. It is assumed that meat is the major market for sheep, and that wool weight or quality is not included in the selection index. (v) Male flock management. A separate male flock is needed to manage the young rams as they mature, as they need to be separated from the ewes to avoid them mating. The male flock is also needed to manage the improved rams during the non-mating season. If the improved rams are rented out, and not sold, then the PABU should operate the male flock as one of the flocks with the PABU. If the PABU sells rams, then the herders who bought the rams can apply for a separate sub-agreement on Male Flock Management. (vi) First-stage ranking of lambs. The male and female lambs will be weighed in November. Females and males based on objective data from the weighing as entered into the breeding index, and some visual assessment. Males are ranked into first, second or third categories. Some rams or ewes may be culled at this stage. (vii) Young rams for mating and distribution. It may be possible for some of the older and larger rams to be used in the NF or distributed for mating after the ranking in November. This practice allows for more rapid genetic improvement. To reduce the risk of poor mating performance, testicles should be checked and mating ratios reduced. (viii) Second-stage ranking of lambs. Lambs will be weighed again the following summer and October. Their wool will be weighed and assessed when shorn. They will be ranked and distributed accordingly to the nucleus flock or for distribution. (ix) Rams for mating and distribution. After the second-stage raking, all males should be categorized for mating in the NF, distribution (sale or rent) or culling. (x) Ewe management: Ewes should be assessed annually for condition of teeth, feet and general visual assessment for decisions on culling. If wool weight, color or quality is included in the selection index, then data needs to be collected on these characteristics. (xi) Doe management: For does cashmere weight, and quality are the key data required to input into indexes for selection. Cashmere samples of all young goats need to be sent to a laboratory for testing. The first cashmere sample will be when the goats are about 15 months old, but bodyweight data can be collected at the same time as occurs with sheep. Special bags and identifiers will be needed for individual packaging of cashmere samples for visual assessment (color) and fiber testing for strength and micron. (xii) Ram management. Ideally, rams should only be used in the nucleus flock for two years to make genetic improvement as rapid as possible. During the non-breeding

season, rams are managed male flock along with rams being used in other flocks. It will be essential that rams are in good condition at mating and have good testicle and semen quality. Male Flock management is covered under a separate sub- agreement. (xiii) Veterinary service delivery for preventive measures such as vaccination and parasite control and treatment (xiv) Supplementary feeding plan and implementation, including forage production if requested and feasible. (xv) Marketing. Marketing of the young males for sale or rent will be an important activity. Marketing includes the analysis of the potential market (price and quantity) for rams and explain to potential herder-customers the advantages of using rams from the nucleus flock. Marketing materials including pricing of rams can include leaflets, signboards at the nucleus flock camps. The coordinator and nucleus flock should try to get feedback from herders who use the rams. (xvi) After-sales service. Operating an “after sales” service with herders who have used the improved rams is an important activity to provide feedback to the PABU. Herders who buy the rams should be trained to condition score the rams at the start of mating and again at the end of mating, and again at the end of mating to indicate how hard they have worked. These herders should also collect data on lambing and survival rates. These herders are an ideal group with which to conduct

219. The activities of the SAU include: (i) Registration of all non-PABU male flocks (ii) Identification of all males in the male flocks (iii) Ensuring that herders do not use home-bred males in their own flocks (iv) Inspection of male flocks two months before mating and at point of mating to ensure they meet standards on condition for mating and advising on management (v) Ensuring standard quality contracts for male flock managers

220. Services. Consultants provide technical support to sub-agreement development and implementation. The services of a number of specialized entities will be required some of the activities. The sub-agreement proposal should include provision for (i) Market study of the potential market for PABU improved males; including baseline of breeding in the soum, including baseline of male flocks, and knowledge practices of herders with respect to breed improvement and reproduction. (ii) Genetic Services: Development of breeding objectives and indexes based on value of sheep/goats (meat and wool). Ongoing management of data generated from the performance recording and recommendations on ranking of males and females. Development of visual assessment guidelines and manuals for sheep/goat selection. (iii) Livestock Genetic Resource National Centre assessment of PABU standards

221. Equipment and supplies: The sub-agreement proposal should include: (i) For PABU: ear-tags for individual identification of all sheep in the NF and applicators for each of the NFMs; animal weighing scales for adult animals, small 55

digital scales for lamb weighing; livestock housing improvements to improve overall design for good animal health and survival, and to facilitate animal ear- tagging, technical guideline booklets; a signboard for each of the camps of each of the NFs; items to assist in marketing, including information leaflets about the nucleus flock and ram availability and price; and results of ram and flock performance details for distribution within the soum, or beyond; computer and IT system for PABU office (ii) For SAU; recording books and pens, (iii) For male flocks: ear-tags, tagging applicators, housing improvements, record books, technical manuals

222. The PABU marketing material should include technical details of the performance of individual rams; and an estimate of the benefit that a herder will get if they purchase (or rent) an improved-breed ram for a higher cost than the traditional system of using a home-bred ram that leads to a degree of in-breeding and lack of genetic progress. As a guide, the ram will produce 100 lambs over three years assuming it is mated with 40 ewes per year at a reproductive rate of 80%. Of the 100 lambs, 70 would expect to have been sold, with the other 30 being retained females. Each lamb sold would be expected to be 1-2% heavier than the home-bred lamb, equivalent to 0.3-0.6 kg per head. This would need to be monetized by expected value to establish pricing. In addition to this is the advantage of improved genes that will be spread into the breeding ewes and provide long-term benefits. In practice, it may take some time for the sale price of improved rams to be established and a full economic analysis of a NF as opposed to a normal self-replacing flock can be conducted.

223. Civil Works: The project will support: (i) upgrade of the livestock housing for PABU flocks (NFs and MFs) to be suitable for good livestock management and for easy performance recording (ear-tagging and weighing). (ii) Construction of a building in the soum adequate for PABUs to work to manage data, hold local meetings, connect to meetings by internet and store equipment and supplies such as eartags, applicators, stocks of record books and extension materials. The office should be sufficient to allow for expansion in the number of PABUs or be adaptable for organizational development such as soum PABU associations or soum association of Group Breeding Schemes.

224. Period: The sub-agreement proposal should be five years.

225. Investment analysis: The sub-agreement investment analysis should include all costs one side, and return measured in an estimate of increased productivity due to improved animal health. This calculation will be automatically generated based on models developed by the PMU. The analysis should also consider the business plan of PVUs.

226. Approval process: The sub-agreement proposal should be submitted to the Soum Steering Committee with a copy to the Grants Secretariat of PMU. Once cleared by the SSC, the proposal should be sent to GS of PMU with SSC in copy.

227. Potential scope: One sheep PABU with 1,000 ewes can provide improved rams for about 20,000 ewes. This assumes the nucleus flock will produce 400 ram lambs each year of which about 12 will be kept for the nucleus flock, 160 available for mating to herders and 228 culled.

The 160 rams can be mated to 6,400 ewes (assuming mating ratio of 40:1) and be used for three years. Under these assumptions, there is scope for 64 PABUs in the 20 project soums, and average of over 3 per soum, with a range of 1-5 PABUs per soum. Whether individual PABUs in the larger soums will expand to reach the market over the whole soum will depend on the local situation. In any case, the project will budget for one sheep PABU per soum.

228. Goats Nucleus Flock PABU: For goats, one PABU with 1,000 does can provide improved bucks for about 15,000 does. This assumes the NF will produce 300 buck kids each year of which about 12 will be kept for the NF, 120 available for mating to herders and 168 culled. The 120 bucks can be mated to 6,400 does (assuming mating ratio of 40:1) and be used for three years. Under these assumptions, there is scope for 55 PABUs in the 20 project soums, and average of nearly 3 per soum, with a range of 2-4 PABUs per soum. Whether individual PABUs in the larger soums will expand to reach the market over the whole soum will depend on the local situation.

229. It is important that the breeding objectives and index for objective assessment and ranking of young sheep and goats be fully informed by the demands of the market for meat and wool. The engagement with the private sector meat and wool industry, as described in the Animal Genetic Law will be critical in this regard, will be important in establishing breeding objectives and selection indices. This is described more fully in the capacity building component.

230. Sheep Terminal Sire Flock: Objective: The objective of the sub-agreement is to establish the organizational structures, relationships, agreements and processes at the soum and aimag levels that can lead to sustainable system of terminal sire sheep breeding (Figure 18).

231. Structures: The most important structure in the terminal sire sheep breeding is the Terminal Sire Flock (TSF), and the flocks that contribute ewes to the TSF. The TSF is a flock of local-breed ewes that is mated to a specialist meat breed ram to produce lambs of high meat content and high growth potential. The aim is to sell all lambs both female and male before the winter. The TSF is not a self-replacing flock. It is established through TSF-cooperative herders contributing ewes at the time of establishment, and then annual contributions of ewes as replacements for ewes culled from the TSF.

232. The TSF-cooperative members can join the same breed improvement associations and working groups as do the sheep and goat PABUs. The TSF is a special kind of PABU.

Figure 18: Structures and Relationships for Terminal Sire Flocks

Source: TRTA Consultant

233. The TSF should have a minimum of 300 ewes as the sole sheep enterprise (no other sheep). The herder members are those who contribute the ewes – “TSF contributors” - and the herder who manages the flock – the “TSF Manager”. The arrangements for management of the TSF – cost- sharing, income sharing, and so on, is up to the members. As this is a relatively new process, experience will build up over time, and guidelines from lessons learnt can be developed.

234. The TSF flock will provide first-cross (“F1”) lambs with a 50/50 breed mix that are mostly intended for sale. However, it is an option to experiment with mating F1 males back to local ewes to get an F2, 75/25 mix to see if such lambs perform better that the F1 lambs. Management of the meat-breed rams needs to be carefully monitored as they are not as adapted to the local conditions as are local sheep. It is important also to avoid unwanted mating with local ewes.

235. Justification: The TSF should be considered at the experimental stage but could yield quality lambs that suit some markets. Therefore, government and project support are justified.

236. Proposal: Herders who have agreed on PUGs/RUAS are eligible to submit a proposal for a sub-agreement to establish a terminal sire flock program. Either a group of herders can form a cooperative or an individual herder can change from a self-replacing flock to a terminal sire flock.

237. The relevant business units related to the TSF are shown in Figure 19. These are: (i) The TSF flock, managed by the TSF manager, and the contributing herders (ii) The male flock where meat-breed males are kept when no mating (iii) The processors with whom the TSF flock have developed a linkage to market the lambs

(iv) The SAU and SVU who provide technical and operational support (v) The PVU that provides animal health services.

Figure 19: Detailed structures and relationships of the Terminal Sire Flock

Source: TRTA Consultant

238. Activities: The main activities for the cooperative system are: (i) A group of herders will form a cooperative and supply a portion of their cull ewes, either older ewes, young ewes or a combination, to a “terminal sire flock (TSF)”. (ii) Terminal sire rams need to be introduced for a period 3-4 months before mating to allow acclimatization. The rams should have individual electronic ear-tags. Rams should be at a ratio of 1:40 ewes, meaning seven rams for 300 ewes. Rams can be used for 3-4 years, so 1-2 replacements per year should be planned. The introduction of rams to existing male flocks needs be monitored carefully to watch for fighting, so they may need to be yarded separately at night. Rams should have supplementary feeding if required to reach target condition score at mating, and have all recommended veterinary procedures. Their testicles, teeth and feet should be checked both two months before and immediately before mating. 59

(iii) Ewes are mated to the rams at the normal mating time for a six-week period. The lamb progeny should have higher growth rates due to the high level of hybrid vigor due to being crossbreeds, and high meat quality due to the genetic qualities of the ram. However, if the ewes are culled from other flocks, their lactation may be less due to lower lactation potential, which may decrease lamb growth potential. (iv) Ewes should be supplementary fed during late pregnancy (last 6-8 weeks) to increase mammary gland development, which will improve mothering ability, lactation and lead to better lamb growth. (v) All lambs will be ear-tagged electronically at birth, and have date, sex, mother, twin or single recorded. (vi) Rams are managed in a male flock during the non-mating period (vii) Male lambs should be castrated using cauterize-cut method. (viii) All lambs will be sold for meat before winter. These lambs will be good candidates for fattening with supplementary feed. Data on bodyweights, eye muscle score, and feeding regime should be collected. (ix) Any ewes that do not produce a lamb will be culled, as well as a portion of the older ewes who had lambs. (x) Before the next mating time, the culled ewes will be replaced by further contributions from the herder group members each year. During non-mating periods, the rams will be managed in a Male Flock as is done with other rams in the soums and bags. Since the rams are not well adapted locally, they may need special attention especially during the winter. (xi) Housing improvements will be constructed at the animal camps to facilitate management of the identification and performance recording. (xii) Lambs marketed by contract and feedback from the processor on carcass quality and consumer interest (xiii) The SAU and SVU provide technical support for animal identification and performance recording including data management (xiv) The PVU provides animal health services

239. The performance recording system should be consistent with national guidelines as recommended by the Livestock Genetic Resource National Centre. Data should be included in national systems so that the effectiveness of the TSF system can be compared in different environments and management systems. The TSF will have access to the PABU building in the soum.

240. The improved meat breed ram will be supplied by the TSF manager or the Livestock Genetic Resource National Centre. Over time, the data collected on lamb growth will be used to modify the TSF program. For example, while a 50/50 mix of local and meat breed ram will be the first attempt at establishing a TSF system, it may be modified in time to a 75/25 local/meat breed mix. In such a case, some of the male lambs from the first cross 50/50 mix may be left entire (not castrated) so they can be used to create a 75/25 mix. This process will need to be closely monitored locally and by the Livestock Genetic Resource National Centre.

241. Services: The project sub-agreement can include:

(i) Market study of the potential market for TSF lambs, including discussions with meat processors and skin buyers; and visits to other areas of Mongolia with specialist meat breed rams (ii) Performance Review: Review of flock performance and lamb growth and carcass data to make recommendations on future structure of TSF breeding programs; (iii) Livestock Genetic Resource National Centre data management and assessment of TSF standards (iv) PABU local assistant (labor) to assist with NF management, as sub-contract with Consulting Firm (v) PVU under contract to Consulting Firm to provide services

242. Equipment and supplies: The sub-agreement proposal should include (i) For TSF: electronic ear-tags for individual identification of all lambs in the TSF and applicators and readers; weighing scales for grown lambs, and small digital scales for lamb birthweight weighing; livestock housing improvements to improve overall design for good animal health and survival, and to facilitate animal ear-tagging and weighing; tablets for data entry; recording books and pens, and technical guideline booklets; a signboard for each of the camps of the TSF; TSF promotion including information leaflets about the TSF flock and terminal sire ram availability and price; and results of lamb and flock performance details for distribution within the soum, or beyond. (ii) Improved meat-breed rams at a rate 1:40 ewes, or eight per 300-ewe TSF, with annual replacements of 3 head.

243. Civil Works: The project will support upgrade of the livestock housing at TSFs to be suitable for good livestock management and for easy performance recording (ear-tagging and weighing).

e. Private Cashmere Processing Unit Sub-agreement

244. Objective: The objective of the sub-agreement is to establish the organizational structures, relationships, agreements and processes that can lead to a cashmere processing and value- adding in the soum (Figure 20).

245. Structures: At the heart of the structures is a Private Cashmere Processing Unit (PCPU), which operates a cashmere sorting facility owned by the soum and constructed with the support of the project. The PCPU has an agreement with the soum to operate the facility. The PCPU has a tripartite agreement with the soum and herder representatives.

246. Herder cooperatives for cashmere marketing are also important structures.

247. Other structures relate to vertical and horizontal linkages at soum, aimag and national level allowing for information exchange and raising and solving issues on technology, governance, policy and so on.

248. Justification: There are a number of examples in the country of cashmere sorting at soum level, which adds value and provides employment, and such opportunities exist in the project soums. 61

Figure 20: Structures and Relationships on Cashmere Marketing

Source: TRTA Consultant

249. Proposal: The proposal should be submitted by herders who have agreed PUGs /RUAs, livestock processors, and SVU. The proposal should include a business plan for the three business units involved: the herder cooperative, the SVU and the processors. The period of the business plan should cover at least five years, and include provision for replacement of capital items.

250. Targets: The targets with- and without-project are shown in Table 19.

Table 19: Cashmere Marketing Targets PUG/ RUA ID:……………………. Indicator Baseline Year 1 Year 2 Year 3 # PCPU functioning # herder cooperatives functioning # tons of cashmere processed through PCPU through facility # tons of cashmere marketed through facility Source: TRTA Consultant

251. Activities: The activities include (i) Herder cooperative agreeing to add-value to cashmere in the soum (ii) Soum constructs facility for cashmere sorting (iii) Private Cashmere Processing Unit (PCPU) rents the facility and uses for sorting and storing, labelling (iv) PCPU or cooperative has contract with processor

(v) Processor procures and provides feedback to PCPU and herders

252. Services: The project supports services for cooperative and PCPU business development.

253. Equipment and Supplies: Start-up sets of bags, labels for first year.

254. Civil Works: The project supports construction of cashmere sorting facility.

255. Period: Three years.

256. Investment Analysis: Measured against project investment and return to project outputs, and individual business plans.

257. Approval process: The sub-agreement proposal should be submitted to the Soum Steering Committee with a copy to the Grants Secretariat of PMU. Once cleared by the SSC, the proposal should be sent to GS of PMU with SSC in copy. The sub-agreement will be a tripartite agreement between the herder cooperative, the PCPU, the soum and the processors.

258. Scope: There is scope for one or more PCPU per soum, but the project will start with one per soum.

F. Inter-Aimag Pasture Use Administration

259. The government established the Inter-Aimag Pasture Use Administration by resolution No. 187 in 2007. To date, the government has taken 783,3 ha of land in 15 aimags for special needs and established nine inter-aimag otor areas to protect livestock from natural and unforeseen risks. These include: (i) Kherlenbayan-Ulaan in Khentii Aimag, 192,800 ha; (ii) Argalant in Bayankhongor and Gobi-Altai aimags, 118,600 ha; (iii) Bagakhairkhan in Zavkhan Aimag, 68,300 ha; (iv) Malakh steppe in Gobi-Sumber Aimag, 73,100 ha; (v) Choibalsan in Dornod Aimag, 124,400 ha; (vi) Chilen in Tuv and Bulgan aimag, 34,100 ha; (vii) Khukh Del in Uvurkhangai and Tuv aimag, 37,900 ha; (viii) Achit Nuur in Uvs Aimag, 28,900 ha; and (ix) Bayannuruu i Khovd Aimag, 105,200 ha; 260. On average about 600,000 head of livestock from more than 700 households in 45 soums and districts of 19 aimags and the capital city spend the winter in these inter-aimag otor areas but the number and pasture capacity varies considerably based on seasonal conditions.

261. The main activities of the Inter-aimag Pasture Use Administration include: 16

16 MOFALI. undated. Cooperation Proposal on Improving Inter-aimag Otor Pastureland Management and Protection. Powerpoint presentation. 63

(i) Improving management, conservation and proper use of the inter-aimag otor pastureland; (ii) Locate new otor pastureland resource and take under its protection; (iii) Manage water supply for otor area; (iv) Increase the herd capability for overcoming natural disaster through building forage stock; and (v) Provide favorable conditions and social services for otor users. 262. Issues with these areas identified by MOFALI include: (i) Increasing demand for otor pastureland due to increase in animal numbers; and (ii) Pastureland degradation is increasing rapidly due to the absence of a pastureland use plan based on studies using advanced methods and resolution. 263. While not mentioned as an issue, it is clear that the administration has limited staff to carry out the extensive program, including: (i) Three administrative staff in Ulaan Baatar; (ii) Four technical staff in Ulaan Baatar, including, • A pastureland management and conservation officer, • An otor movement and coordination officer, • An animal health officer, and • A water point, forage reserve officer; and (iii) 15 otor area officers, one in each area. 264. Measures proposed to improve the use of inter-aimag otor pastureland include: (i) Legal reform, including, • Approve and submit the law on inter-aimag otor pasture, • Establish a legal basis for fees for use of pastureland, and • Upgrade pasture carrying capacity; (ii) Strengthening of policy coordination, including, • Detailed assessment pastureland in the inter-aimag otor, • Develop and implement a grazing management plan for seasonal regions, based on pastoral investigation, • Improve registration and information system for otor pasture use and simplify state services to herders, • Strengthen the control checks for use and coordination of inter-aimag otor pastureland, and • Improve responsibilities by improving pastureland use and protection through agreements to cooperate on inter-aimag pastureland use and protection between aimags and soums; and (iii) Administration and optimization, including

• Develop and coordinate action plans with local self-governing organizations on inter-aimag otor pastureland management and protection, • Provide veterinary control and services in inter-aimag otor pastureland and cooperate with soum veterinary officers, and • Improve the capacity building and investment of administration of inter- aimag otor pastureland.

Climate-Resilient and Sustainable Livestock Development Project (RRP MON 53038-001)

IV. LIVESTOCK SUBPROJECT DESIGN

A. Bulgan Aimag Subproject

1. Current Situation

a. Subproject Overview

265. Bulgan Aimag is located in the central part of the Orkhon and Selenge river basins with an area of 48,733 km2 and borders Arkhangai, Khuvsgul, Selenge and Tuv aimags (Figure 21). The highest mountains in the aimag are Bulgankhan, Buregkhangai, Dulaankhaan, Buteel and Khantai Darkhan khaan. The main rivers flowing through the aimag are the Selenge, Orkhon and Khanui, while the main lakes are the Khargal, Khunt and Airkhan lakes and the spars include Khulij, Khunt, Khanui and Asgat.

Figure 21: Project Area in Bulgan Aimag

Source: TRTA Consultant

266. Population. Bulgan Aimag has a population of 61,794 people in 19,072 households of which 8,514 are herder households. There are 16 soums in the aimag of which four—Mogod, Saikhan, Khishig-Undur, and Gurvanbulag—are in the subproject area.

267. Gurvanbulag Soum. Gurvanbulag Soum is located 140 km from Bulgan aimag center and 280 km from Ulaanbaatar City. This soum represents the khangai type. Gurvanbulag soum borders with Khashaat Soum in Arkhangai Aimag, and Dashinchilen, Khishig-Undur and Mogod soums in Bulgan Aimag. The area of the soum is 2,627 km2, of which 213,963 ha is pastureland,

446 ha arable land and 7,232 ha abandoned cropland. The Khugnu Khan special protected area covers an area of 37,190 ha of the soum. There are 59 rivers, lakes and ponds, which provide surface water resources. It has a harsh continental climate with average annual precipitation of 216.7 mm. Rocky permafrost dominates the mountains with coarse humus in the mountain meadows and brown soils in the river valleys. The dominant vegetation of the mountain steppe pastures is Kobresia, Carex, Forb, Grass, and Festuca. The average annual pasture yield is 37 kg/ha. The annual carrying capacity of pasture is 191,300 live sheep units, which was exceeded by 152% in 2019. According to the pastureland inspection conducted in 2008-2012, 39% of soum pastures were degraded. Pastures is used traditionally in all four seasons. The ratio of sheep to goats is 1.6:1. In 2019, the soum prepared 1,088 tons of fodder, comprising 863 tons of hay, 61 tons of feed grain, and 164 tons of hand-made fodder, equivalent to 2.7kg of grass per live sheep unit.

268. Khishig-Undur Soum. Khishig-Undur Soum is located 72 km from Bulgan aimag center and 287 km from Ulaanbaatar City. The soum has a combination of khangai and steppe types. Khishig-Undur Soum borders with Dashinchilen, Mogod, Buregkhangai and Orkhon soums all in Bulgan Aimag. The area of the soum is 2,820 km2, of which 241,684 ha is pastureland, 32,300 ha forest, 3,514 ha arable cropland and 1,876 ha abandoned cropland. There are 85 rivers and good surface water resources. Average annual precipitation is 250 mm. Mountain steppes and steppe pastures are widespread. The average annual pasture yield 37 kg/ ha. The annual carrying capacity of the soum pasture is 184,200 live sheep units, which was exceeded by 110% in 2019. The ratio of sheep to goats is 1.6:1. In 2019, the soum prepared 2,395 tons of fodder, comprising 2,000 tons of hay, 188 tons of grain feed, and 207 tons of hand-made fodder, equivalent to 7.0 kg of grass per live sheep unit.

269. Mogod Soum. Mogod Soum is located 120 km from Bulgan aimag center and 330 km from Ulaanbaatar City. The soum represents the khangai type. Mogod Soum borders with Khishig-Undur, Saikhan, Orkhon and Gurvanbulag soums all in Bulgan Aimag. The area of the soum is 2,455 km2, of which 206,400 ha is pastureland, 2,813 ha hayfields, 33,086 ha forest, 715 ha arable cropland, and 1,561 ha abandoned cropland. The soum has 102 lakes and 72 rivers with good surface water resources. Average annual precipitation is 250 mm. Mountain steppe is the dominant pasture type. Average annual pasture yield of the soum is 40 kg/ha. The annual carrying capacity of the soum pasture is 233,200 live sheep units, which was exceeded by 140% in 2019. The ratio of sheep to goats is at the level of the traditional herd structure, and 32.8% of the pastures are overgrazed. In 2019, the soum prepared 2,207 tons of fodder, comprising 2,000 tons of hay and 207 tons of hand-made fodder, equivalent to 4.3 kg of grass per live sheep equivalent.

270. Saikhan Soum. Saikhan Soum is located 101 km from Bulgan aimag center and 419 km from Ulaanbaatar city. The soum represents the khangai type. Saikhan Soum borders with Ulziit and Khairkhan soums in Arkhangai Aimag, and Mogod, Bayan-Agt, Khishig-Undur, Bugat and Orkhon soums in Bulgan Aimag. The area of the soum is 2,821 km2, of which 246,069 ha is pastureland, 1,840 ha hayfields, 24,327 ha forest, 12 ha arable cropland, and 6,599 ha abandoned cropland. There are 1,219 lakes and 366 rivers and soum is rich with surface water resources. Average annual precipitation is 223-250 mm. Mountain steppes, meadows and hayfields are the dominant pasture types. Average annual pasture yield of the soum is 33 kg/ha. The annual carrying capacity of the pasture is 195,800 live sheep units and was exceeded by 262% in 2019. About 60% of the pasture was overgrazed. In the case of small livestock, the traditional herd structure is preserved. Pastures is used traditionally in all four seasons. In 2019, 2,880 tons of hay was harvested, of which 100 tons were reserved for the reserve fund. The fodder prepared by soum was equivalent to 4.0 kg of grass per live sheep unit, sufficient to feed 67

livestock for 8 days.

b. Natural Resources

271. The Bulgan subproject area comprises 10,734 km2 (22% of the aimag territory), of which 913,228 ha is pastureland, 90,897 ha forest land and 1,917 ha water sources (Table 20).

Table 20: Land Classes in Bulgan Subproject Area Soum Territory Pasture Forest Water bodies Cropland (ha) (ha) (ha) (ha) (ha) Gurvanbulag 262,706 213,963 - 59 446 Khishig-Undur 282,047 241,684 32,300 181 3,514 Mogod 245,500 206,400 33,086 92 715 Saikhan 282,091 246,069 24,327 1,585 12 Subproject total 1,072,345 908,117 90,897 1,917 4,687 % of aimag area 22 37 5 9 6 Aimag total 4,873,300 2,485,150 1,905,000 22,149 81,765 Source: Project Aimag Food and Agriculture Departments and the target soum governments

272. Land degradation conditions in the subproject soums in Bulgan Aimag vary from level II to level IV. Level II shows slight degradation, meaning that key species are still dominant, some sensitive grazing forbs are in decline and grazing resistant species are increasing. Level IV indicates heavy degradation, meaning remnants of key species are thinning, and abundance of degradation indicator species is increasing. Land recovery category varies from class II to IV. Class II indicates that the plant community is altered but may be rapidly recovered in 3-5 growing seasons with favorable climatic conditions or a change in management. Class IV indicates that the plant community is altered due to the local loss of key plant species, invasion of noxious plant species, or alteration of hydrology that is unlikely to be recovered for over a decade to many decades without intensive interventions such as species removal, seeding, or manipulations to recover the historical hydrological function.

273. Pasture degradation is a problematic issue in the subproject area. The degradation level is already between II and IV in subproject soums in Bulgan Aimag, which indicates that the pasture conditions of Bulgan subproject area could be recovered to their initial conditions in 3-10 (or more) years. This is a key concern for the livestock sector in view of climate change induced frequency increase of severe weather events.

c. Livestock Management

274. The subproject area has a population of 12,816 persons (21% of the aimag population) in 3,975 households of which 2,759 are herder households (Table 21). Poverty incidence averages 21.6% in the subproject area and ranges between 13.6% in Khishig-Undur Soum and 30.0% in Saikhan Soum.

Table 21: Population and Households in Bulgan Subproject Area Poverty Population Households Herder households Herders (% of Soum (no.) (no.) (no.) (no.) households ) Gurvanbulag 3,335 984 571 935 22.8 Khishig-Undur 3,198 1,046 640 821 13.6 Mogod 2,711 851 618 1,030 18.6

Poverty Population Households Herder households Herders (% of Soum (no.) (no.) (no.) (no.) households ) Saikhan 3,572 1,094 930 1,391 30 Total 12,816 3,975 2,759 4,177 21.5 Sources: Aimag Food and Agriculture Department and soum governments and Ministry of Labour and Social Protection 2020 for poverty

275. Herder groups. There are 48 herder groups in the subproject area who have a total of 577 members and use 14% of the pasture area (Table 22). Twenty four percent of the herder households are members of herder groups, ranging between 13% in Mogod Soum and 60% in Khishig-Undur Soum.

Table 22: Herder Groups in Bulgan Subproject Area Khishig- Indicators Unit Gurvanbulag Mogod Saikhan Overall Undur Total households no. 984 1,046 851 1,094 3,975 Herder households no. 571 640 618 930 2,759 Herder groups no. 6 18 16 8 48 Members no. 78 327 87 85 577 Members as % of herder % 14% 51% 14% 9% 21% households Pasture used by herder groups % 28 - 13 15 14 Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

276. Pasture User Groups. There are four pasture use groups (PUGs) with 28 members in the subproject area all of which are in Khishig-Undur Soum (Table 23). There are two Soum Pasture Associations in the subproject area, one in each of Khishig-Undur and Saikhan soums.

Table 23: Pasture User Groups and Soum Pasture Associations in Bulgan Subproject Area Pasture User Groups Soum Herder Membership of Soum Pasture househol Pasture User Number Members Associations ds Groups Khishig-Undur 4 28 1 640 4% Saikhan - - 1 930 0% Total 4 28 2 2,759 1% Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

277. Cooperatives. There are 15 cooperatives in the subproject area with a total of 209 members (Table 24). On average, 7% of herder households are members of the cooperatives. Of these 15 cooperatives, 10 are herder cooperatives with four in Gurvanbulag, three in Khishig- Undur and three in Mogod. Membership information is only reported for Gurvanbulag, which has 200 members, representing 31% of herder families. Cooperatives do not undertake any pasture protection activities, but herders mainly joined to benefit from the government wool premiums through the cooperatives, so it more suitable to cooperate with them linking herders with processing factories.

Table 24: Cooperatives in Bulgan Subproject Area Cooperatives Herder cooperatives Herder Enrollment in Soum Number Members Number Members households cooperatives Gurvanbulag 7 200 4 200 640 31% Khishig-Undur 4 9 3 618 0% Mogod 3 - 3 930 0% Saikhan 1 - - 571 0% Total 15 209 10 200 2,759 7% Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

278. Forest User Groups. There are 11 forest user groups in the subproject area located in areas where there are project forest resources (Table 25). There are groups in all subproject soums except Mogod. These groups have 866 members, which amounts to 31% of the total herder households. Excluding Mogod Soum average membership is 40% of herder households and is a maximum in Saikhan Soum where it is 77%. The purpose of the forest user groups is to protect forest resources, not pasture.

Table 25 Forest User Groups in Bulgan Subproject Area Forest User Groups Enrollment in Soum Herder families Number Members Forest User Groups Gurvanbulag 4 120 571 21% Khishig-Undur 3 30 640 5% Mogod - - 618 0% Saikhan 4 716 930 77% Total 11 866 2,759 31% Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

d. Pasture Infrastructure

279. There are 163 engineering designed deep wells in the pasturelands, 124 springs, 28 lakes and ponds, 43 rivers, and there is indicated to be a need for an additional 76 deep wells in the subproject area (Table 26). These additional deep wells are required to ensure sufficient drinking water for livestock numbers within the carrying capacity and to relieve grazing pressure on pastures near to existing wells. Pasture degradation will be reduced because currently underused pasture will be developed thus expanding the pasture area for livestock. Water supply for pastureland is in serious disrepair and urgently needs to be improved, not only as drinking water for livestock but also to reverse pasture degradation. Traditionally, individual water points are constructed for livestock watering including both high yielding engineering (deep) wells and shallow/hand-made wells. Due to a lack of maintenance, the engineering wells in particular have degraded since the transition period and the number of operational wells has sharply declined. This has forced herders to move their stock to areas around the operational wells and close to rivers. The carrying capacity of the pastures in these areas is far exceeded, causing serious land degradation.

Table 26: Water Points in Bulgan Subproject Area Lakes and Additional Soum Deep wells Springs Rivers ponds wells required Gurvanbulag 35 41 16 10 12 Khishig-Undur 22 24 5 15 20 Mogod 46 27 5 17 20 Saikhan 60 32 2 1 24 Total 163 124 28 43 76

Source: Project Aimag Food and Agriculture Departments and the target soum governments

280. There are 1,504 livestock open enclosures without roof, 1,902 livestock semi-roofed enclosures, 65 livestock sheds, 2,483 winter and spring camps with certificates17 and 6 fodder storages in the subproject area (Table 27). Achievement of sustainable pasture management through reduction of livestock numbers and rehabilitation of degraded pasture requires both pasture improvement and improved livestock enclosures and sheds, and fodder storage.

Table 27: Animal Shelters and Storages in Bulgan Subproject Area Open Semi-roofed Animal Camps with Fodder Soum enclosure enclosure shed certificate storage Gurvanbulag 615 422 60 541 - Khishig-Undur 200 301 2 453 - Mogod 241 367 2 453 5 Saikhan 448 812 1 1,036 1 Total 1,504 1,902 65 2,483 6 Source: Project Aimag Food and Agriculture Departments and the target soum governments

e. Livestock Numbers, Breeds and Output

281. Between 1990 and 2019 the livestock number in the subproject area increased by 233%, of which Gurvanbulag Soum increased by 188%, Khishig-Undur Soum by 254%, Mogod Soum by 256%, and Saikhan Soum by 248% (Table 28 and Figure 22).

Table 28: Total Livestock Number in Bulgan Subproject Area for Selected Years Year Increase between Soum 1990 2000 2010 2019 1990 and 2019 Gurvanbulag 113.3 166.6 263. 326.6 188% Mogod 92.7 148.8 192.4 329.6 256% Saikhan 107.4 182.3 225.3 373.7 248% Khishig-Undur 69.3 105.9 149. 245.5 254% Bulgan subproject area 382.6 603.6 829.6 1,275.4 233% Source: National Statistics Office of Mongolia

17 According to the Law on Land clause 52.7, land under winter and spring camps can be possessed by khot ail. As per this legal ground, the certificate has been issued for such camps by soum government. 71

Figure 22: Livestock Number Trend in Bulgan Subproject Area

1,400,000

1,200,000

1,000,000

800,000

600,000

Numberlivestock of 400,000

200,000

- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Years of 1990-2019

Gurvanbulag Khishigundur Mogod Saikhan

Source: National Statistics Office of Mongolia, Feb-May 2020

282. There were 1.28 million livestock in the Bulgan subproject area in 2019, equivalent to 2.14 million live sheep units. Details by type of livestock and by soum are in Table 29. Overall, the ratio of sheep to goats was 2.09:1 with individual soums varying between 1.56:1 in Gurvanbulag and 2.73:1 in Saikhan.

Table 29: Livestock Numbers by Soum in 2019 Soum Horses Cattle Camels Sheep Goats Total Live Sheep Ratio Units sheep:goats Gurvanbulag 18,909 10,773 184 180,874 115,898 326,638 483,103 1.56:1 Khishig-Undur 16,970 9,856 - 136,332 82,999 245,457 388,327 1.64:1 Mogod 26,602 15,677 71 208,366 78,880 329,596 559,989 2.64:1 Saikhan 41,202 19,297 73 229,108 84,022 373,702 709,289 2.73:1 Total 103,683 55,603 328 754,680 361,799 1,275,393 2,140,708 2.09:1 Source: National Statistics Office of Mongolia

283. Each of the soums has a history of dzuds. Gurvanbulag Soum experienced dzuds in 2002- 03, 2010-11 and 2017-18, losing 17-40% of the livestock each time. Since the most recent dzud, livestock numbers have increased by 17.5% in one year. Khishig-Undur Soum experienced dzuds in 1999-2003, 2009-10, and 2017-18. Since the most recent dzud, livestock numbers have increased by 12.3% in one year. Mogod Soum experienced dzuds in 1999-2003, 2009-10 and 2016-2018, after which livestock numbers have increased by 2.3%. Saikhan Soum experienced dzuds in 1999-2003, 2009-2011 and 2016-2018, losing more than 30% of the livestock each time. After the 2009-11 dzud, livestock numbers increased by 65.9% in 8 years.

284. Despite of the predominance of local livestock breeds, there are a small number of Uzemchin, Sartuul, and Bayad sheep, Zalaa Jinst goat, and Selenge and Alatau cattle in Mogod

soum. Despite of predominant local breeds, there are the Uzemchin, Sartuul and Bayad sheep (15,340 heads), Erchmiin Khar breed goats (3,503 heads), and Darkhad and Galshar horses (1,441 heads) in Saikhan soum.

285. Output. The situation is similar in each of the soums in Bulgan subproject area. Meat is the major source of the income for herder households. Herders supply more than 290,000 head of livestock annually, of which one herder household sells an average of 100 heads and the wealthy ones 400 heads. Each herder household sells between 3.0 tons and 30 tons of meat per year. Cashmere is the other main sources of income for herder households. The project area produces about 90 tons of cashmere per year. Cooperatives, factories and the private traders compete against each other in collection and supply of livestock and related products such as meat, cashmere and wools, and hides and skins to markets.

f. Inputs and Services

286. There are 16 private veterinary units (PVU) in the subproject area (Table 30). Legally, PVUs must provide general or specialized professional care and services in the field of prevention, diagnosis, treatment of all or certain types of animal diseases, combating infectious diseases and ensuring safety of animal originated raw materials.18 It must be a legal entity with a veterinarian accredited to provide professional services, premises and equipment that meet the standard requirements. There are no private animal breeding units (PABUs) in the subproject area.

Table 30: Private Veterinary Service Units in Bulgan Subproject Area Soum Number Names Remarks GME, Require all the equipment. Gandgait, Gurvanbulag 5 Dariin Ulaan, Shuult, Uyanga Yaruu Dushkhangai Uul, Require all the equipment. Khishig-Undur 3 Amid alt, Jargalant Ovogt Ajnai khaltar, Require all the equipment. Otsonkhairkhan Uul, Mogod 4 Rashaant Mogod, Buyant-Orkhon Ugalj Saikhan, Require all the equipment. Undrakh Nuur, Saikhan 4 Ugalj Khuremt, Tsovoodoi Total 16 Source: Project Aimag Food and Agriculture Departments and the target soum governments

287. There are 14 trading entities and one citizen trades in livestock originated products in subproject area (Table 31).

18 The PVUs can also provide the special specialized veterinary care and services in mobile and localized means. 73

Table 31: Traders of Livestock Products Bulgan Subproject Area Soum Traders of meat, by-products, wool and Individuals and legal entities cashmere for primary processing Gurvanbulag Bayanberkh Coop 1 Khishig-Undur MMAO, Tersen Nutgiin Khishig Coop, 8 Milk processing: 1 Darkhankhaan Maanit Coop, Khavtgain Gimikhishig undur LLC Bel Coop, Altan Khuleg Od, Gimikhishig, Tersen Nutag, and Khishig Ender Naran coops Mogod Ch. Munkhtur, B.Davaasuren, 3 M.Amartuvshin Saikhan Ikh Buteel Undrakh coop, Ukhaa Ereg 2 coop Total 14 1 Source: TRTA Consultant, Feb-May 2020

g. Downstream Supply Chain

288. There are no abattoir, meat and dairy processing factories or workshops, or livestock feeding units in the Bulgan subproject area. Livestock and meat are prepared by herders in the traditional way and sold to middlemen or transported to settlements for sale. There is one household which runs a fodder production business in Gurvanbulag Soum.

289. The major marketing problems in Bulgan subproject area include: (i) the lack of local facilities such as no local abattoir, no standard lorries and no local buyers; (ii) a lower price than in the market, (iii) major buyers differ depending on location of the soums to the settlements, but typically Ulaanbaatar is also a marketplace; and (iv) live animals are transported in warm seasons and carcasses are in cold seasons. The cost of transportation to Ulaanbaatar and other issues are summarized in Table 32.

Table 32: Major Problem and Buyers in Bulgan Subproject Area Soum Major problems Major buyers Transportation Gurvanbulag No local abattoir, Sells to middleman at central Transports: Small lorries. price lower than markets, Emeelt and Khuchit Transport costs: 4,000 MNT per small, market one Shonkhor, of Ulaanbaatar. and 30,000 MNT per big animals. Khishig-Undur No local abattoir, Sells to middleman on the way Transports: any lorry. no standard to Ulaanbaatar. Transport: 15,000 MNT/head for small, lorry, no local 20,000 MNT/head for big animals. buyers Mogod Low price, and Sells to local buyers, Erkht Transports: Mighty, Porter. no local buyers Tushig LLC, Tansag Mogod Transport cost: 8,000-10,000 MNT per LLC, Elbeg Orshikh LLC in small, 50,000-70,000 MNT per big autumn and markets in animals. 5,000 MNT per a carcass of Ulaanbaatar in summer and small, and 20,000MNT per a carcass of autumn. big animals. Saikhan No local buyer. Sells to any middleman who Transports: Мighty, Kanter, Porter. come to rural areas. Transport cost: 200,000-300,000 MNT. Source: TRTA Consultant, Apr 2020

h. Local Legislation

290. In support of national legislation, the soums have approved and follow local legislation (Table 33).

Table 33: Local Legislation in Bulgan Subproject Area Soum Document Approved Gurvanbulag Soum citizen's khural resolutions Citizens' Representative Meeting, Resolution on pasture use. No.XX, 2015 Khishig-Undur Land law Parliament of Mongolia, 2002.06.07 Soum livestock program Citizens' Representative Meeting, Resolution No.XX, 2019 Pasture responsibility procedure Citizens' Representative Meeting, Resolution No.XX, 2019.12 Mogod Bagh citizen's khural resolutions on pasture release. Soum livestock policy Citizens' Representative Meeting, Resolution No.XX, 2012 Saikhan Bagh citizen's khural resolutions on pasture release. Source: TRTA Consultant, Feb-May 2020

2. Subproject Targets

291. The Bulgan Aimag subproject will have annual and end-of-project targets that relate to each of the soum sub-agreements. The end-of-project targets related to grazing management are shown in Table 34. These will be updated during implementation and annual targets will also be developed during the aimag subproject planning meetings as per the aimag subproject template.

Table 34: Bulgan: Targets Related to Grazing Management Sub-agreements Livestock Sheep Units (000s) No. Pasture User Groups Degradation Level (1-5) a Soum Baseline Target Baseline Target Baseline Target 2019 2027 2019 2027 2019 2027 Without Project Gurvanbulag 483.1 483.1 8 8 2 3 Khishig-Undur 388.3 388.3 5 5 3 4 Mogod 560.0 560.0 5 5 3 4 Saikhan 709.3 709.3 0 0 4 5 Total 2,140.7 2,140.7 18 18 3 4 With Project Gurvanbulag 483.1 426.3 8 23 2 1 Khishig-Undur 388.3 342.6 5 26 3 2 Mogod 560.0 494.1 5 25 3 2 Saikhan 709.3 625.8 0 37 4 3 Total 2,140.7 1,888.9 18 111 3 2 a Aimag degradation levels are the averages of the project soums. Source: Consultant’s estimates

292. The targets second-generation sub-agreements (Table 35) assume that each soum will implement one of each.

Table 35: Bulgan: Second-Generation Sub-agreements Targets No. No. PABU No. No. No. PFU Soum PLMU (Sheep/Goats/TSF) PLFU PCPU B T B T B T B T B T With Project Gurvanbulag 0 1 0 1 1 2 0 1 0 1 Khishig-Undur 0 1 0 1 0 1 0 1 0 1 Mogod 0 1 0 1 0 1 0 1 0 1 Saikhan 0 1 0 1 0 1 0 1 0 1 Total 0 4 0 4 1 5 0 4 0 4 75

PLMU = Private Livestock Marketing Unit: PABU = Private Animal Breeding Units; TSF = Terminal Sire Flock; PVU=Private Veterinary Units; PFU = Private Forage Units; PFLU = Private Feedlot Units; PCPU = Private Cashmere Processing Units; B = Baseline 2019; T = Targets at end of project period Source: TRTA Consultant

3. Subproject Activities

293. Forty-eight sub-agreements are expected to be implemented in Bulgan subproject area (Table 36).

Table 36: Number of and Type of Sub-Agreements in Bulgan Subproject Area No. Sub-Agreement Type Sub-agreement number 1 Pasture User Group/Rangeland User Agreement Development 4 (1 per soum) 2 Pasture User Group/Rangeland User Agreement Implementation 24 (1 per bagh) 3 Private Veterinary Unit 4 (1 per soum) 4 Private Livestock Marketing Unit 4 (1 per soum) 5 Private Forage Unit and Private Feedlot Unit 4 (1 per soum) 6 Private Animal Breeding Unit 4 (1 per soum) 8 Private Cashmere Processing Unit 4 (1 per soum) Total 48 Source: TRTA Consultant

4. Subproject Implementation Schedule

294. The implementation schedule is shown in Table 37.

Table 37: Bulgan Subproject Implementation Schedule Activities 2021 2022 2023 2024 2025 2026 2027 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 PMU operational Consulting Firm Operational Appoint Soum Steering Committee Appoint Soum Technical Team Aimag subproject workshops Soum Information campaign PUG/RUA Development Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Implement Activities PUG/RUA Implementation Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PVUs Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PLMU

Activities 2021 2022 2023 2024 2025 2026 2027 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PFU and PLFU Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities Nucleus & Terminal Sire Flocks Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PCPU Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities Source: TRTA Consultant

5. Subproject Benefits

295. Subproject benefits arise from (i) increased livestock output, and (ii) reduced greenhouse gas emissions and increased carbon sequestration due to natural resource recovery. Increased carcass weight and fiber weight is estimated in Table 39. The with-project scenario is expected to take 15 years to reach full development.

Table 38: Livestock Outputs Without- and With-Project in Bulgan Subproject Area Year Livestock Turnoff (no.) Meat Production (tons) Fiber Production (tons) Sheep Goats Cattle Sheep Goats Cattle Wool Cashmere Without Project 143,805 67,059 7,399 2,572 941 821 327 58 With Project 2021 143,805 67,059 7,399 2,572 941 821 327 58 2022 143,805 67,059 7,399 2,572 941 821 327 58 2023 143,805 67,059 7,399 2,572 941 821 327 58 2024 165,190 77,302 9,003 3,022 1,110 1,024 334 57 2025 164,378 76,924 8,971 3,060 1,124 1,037 341 57 2026 162,946 76,210 8,908 3,103 1,139 1,054 347 56 2027 161,515 75,497 8,845 3,128 1,148 1,064 353 55 2028 159,510 74,467 8,751 3,160 1,158 1,078 359 55 2029 157,505 73,438 8,658 3,174 1,162 1,085 364 54 2030 154,973 72,215 8,522 3,193 1,169 1,094 368 53 2031 152,441 70,993 8,386 3,194 1,168 1,094 373 52 2032 149,425 69,517 8,239 3,201 1,170 1,101 376 52 2033 146,410 68,040 8,091 3,190 1,165 1,099 379 51 2034 142,951 66,372 7,903 3,184 1,163 1,100 381 50 77

Year Livestock Turnoff (no.) Meat Production (tons) Fiber Production (tons) Sheep Goats Cattle Sheep Goats Cattle Wool Cashmere 2035 139,492 64,704 7,715 3,159 1,153 1,092 383 49 Source: TRTA Consultant

296. A major benefit of the project will be the protection of the natural resources for future generations, which is expressed as reduction in greenhouse gas emissions and increased carbon sequestration. It is expected that degradation levels will increase by one level in the without- project scenario, and decrease by one level in the with-project scenario (Table 39).

Table 39: Pasture Degradation Targets in Bulgan Subproject Area Degradation Level (1-5) Soum Baseline Without Project With Project (2019) (2026) (2026) Gurvanbulag 2 3 1 Khishig-Undur 3 4 2 Mogod 3 4 2 Saikhan 4 5 3 Average 2 3 1 Source: TRTA Consultant

6. Subproject Cost

297. The Bulgan subproject base cost is estimated as $3,451,674. Base costs for each sub- agreement are shown in Table 40 and detailed costs are set out in Table 41.

Table 40: Costs of Sub-agreements for Bulgan Subproject Unit Value Units Value Sub-Agreement Unit ($) (no.) ($) PUG RUA Development soum 10,000 4 40,000 PUG RUA Implementation a bag 87,348 24 2,096,340 PVU soum 43,738 4 174,954 PLMU soum 80,115 4 320,460 PFU and PFLU and herder feeding soum 158,605 4 634,420 PABU soum 35,375 4 141,500 PCPU soum 11,000 4 44,000 Total 3,451,674 a Excludes in-kind beneficiary contributions. PUG = pasture user group, RUA = rangeland user agreement, PVU = private veterinary unit, PLMU = private livestock marketing unit, PFU = private feeds unit, PFLU = private feedlot unit, PABU = private animal breeding unit, PCPU = private cashmere processing unit Source: Consultant’s estimates

Table 41: Detailed Costs by Year for Bulgan Subproject Unit Cost by Year ($) Cost Total Sub-Agreement/Item Unit ($) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ($) PUG RUA Development - 20,000 10,000 10,000 - - 40,000 Information Materials herder 5 - 20,000 10,000 10,000 - - 40,000 PUG RUA Implementation a - 734,744 719,439 524,085 467,980 - 2,096,340 Basic Eartags (PUG) unit 1 - 6,000 12,000 6,000 - - 24,000 Basic Eartags Applicators (PUG) unit 50 - 900 1,800 900 - - 3,600 Record book set (PUG) unit 500 - 1,000 2,000 1,000 - - 4,000 Weighing Scales (PUG) unit 1,000 - 2,000 4,000 2,000 - - 8,000

Unit Cost by Year ($) Cost Total Sub-Agreement/Item Unit ($) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ($) Small hanging digital Scales (PUG) unit 15 - 10,500 21,000 10,500 - - 42,000 Cameras for Land Manager (Env set 5,000 - 5,000 5,000 5,000 5,000 - 20,000 Monitoring) Herder technical info and record books unit 12 - 8,400 8,400 8,400 8,400 - 33,600 Deep well rehabilitation wells 2,500 - 12,500 12,500 12,500 12,500 - 50,000 Winter Camp upgrade house 140 - 98,000 98,000 98,000 98,000 - 392,000 Beneficiary in-kind contribution: Winter house 60 - 42,000 42,000 42,000 42,000 - 168,000 Camp upgrade Hay fields materials herder 200 - 140,000 140,000 140,000 140,000 - 560,000 Technical Support Group office upgrade unit 10,000 - 10,000 10,000 10,000 10,000 - 40,000 Soum PUG office unit 10,000 - 10,000 10,000 10,000 10,000 - 40,000 Water/ wells unit 9,500 - 152,000 152,000 152,000 152,000 - 608,000 Geophysical Surveys well 505 - 8,080 8,080 8,080 8,080 - 32,320 Land Manager computers IT set 2,000 - 4,000 2,000 2,000 - - 8,000 Information Materials soum 4.00 - 16,000 8,000 8,000 - - 32,000 Soum Reserve area deep wells herder 10,000 - 20,000 10,000 10,000 - - 40,000 Geophysical Surveys well 505 - 1,010 505 505 - - 2,020 Soum Reserve area animal shelters shelters 2,500 - 30,000 15,000 15,000 - - 60,000 Soum Reserve area signboards unit 100 - 400 200 200 - - 800 Environmental Baseline Assessments ls 30,000 - 24,000 24,000 24,000 24,000 - 96,000 PVU 19,010 - 87,477 87,477 - - - 174,954 SAU computers IT set 2,000 - 4,000 4,000 - - - 8,000 SVU computers IT set 2,000 - 4,000 4,000 - - - 8,000 PVU marketing materials herder 2 - 3,477 3,477 - - - 6,954 PVU equipment and supplies unit 5,000 - 27,000 27,000 - - - 54,000 Animal Health Books herder 5 - 7,500 7,500 - - - 15,000 Technical booklet herder 3 - 4,500 4,500 - - - 9,000 PVU upgrade unit 5,000 - 27,000 27,000 - - - 54,000 Soum vaccine storage unit 5,000 - 10,000 10,000 - - - 20,000 PLMU - 82,115 82,115 78,130 78,100 - 320,460 Basic Eartags (PLMU) unit 1 - 10,000 10,000 10,000 10,000 - 40,000 Basic Eartags Applicators (PLMU) unit 50 - 1,000 1,000 1,000 1,000 - 4,000 Record book set (PLMU) unit 100 - 600 600 600 600 - 2,400 PLMU technical info manual unit 15 - 15 15 30 - - 60 Weighing Scales (PLMU) unit 900 - 3,600 3,600 3,600 3,600 - 14,400 Marketing materials (PLMU) unit 5 - 2,500 2,500 2,500 2,500 - 10,000 PLMU computers IT unit 2,000 - 4,000 4,000 - - - 8,000 Livestock Marketing Facility unit 20,000 - 20,000 20,000 20,000 20,000 - 80,000 PLMU Fodder Storage Facility unit 20,000 - 20,000 20,000 20,000 20,000 - 80,000 PLMU office unit 10,000 - 10,000 10,000 10,000 10,000 - 40,000 PLMU : Geophysical survey well 400 - 400 400 400 400 - 1,600 Deep wells unit 10,000 - 10,000 10,000 10,000 10,000 - 40,000 PABU - 37,575 37,575 33,175 33,175 - 141,500 PABU Basic Eartags unit 1 - 5,000 5,000 5,000 5,000 - 20,000 PABU Basic Eartags Applicators unit 50 - 100 100 100 100 - 400 PABU Weighing Scales unit 1,000 - 1,000 1,000 1,000 1,000 - 4,000 PABU Marketing materials set 200 - 200 200 200 200 - 800 PABU Small hanging digital Scales unit 15 - 150 150 150 150 - 600 SAU eqpt unit 1,000 - 1,000 1,000 1,000 1,000 - 4,000 Male Flock Basic Eartags unit 1 - 3,400 3,400 3,400 3,400 - 13,600 Male Flock Basic Eartags Applicators unit 50 - 900 900 900 900 - 3,600 Male Flock Weighing Scales unit 1,000 - 1,000 1,000 1,000 1,000 - 4,000 Male flock Technical manuals unit 10 - 200 200 - - - 400 PABU Technical manuals set 10 - 300 300 300 300 - 1,200 79

Unit Cost by Year ($) Cost Total Sub-Agreement/Item Unit ($) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ($) Basic Eartags (Term Sire Flock) unit 1 - 500 500 500 500 - 2,000 Basic Eartags Applicators (Term Sire unit 50 - 100 100 100 100 - 400 Flock) Record book set (TSF) unit 500 - 1,000 1,000 1,000 1,000 - 4,000 Weighing Scales (Term Sire Flock) unit 900 - 900 900 900 900 - 3,600 TSF Technical manuals unit 10 - 200 200 - - - 400 PABU signboard unit 125 - 125 125 125 125 - 500 PABU computers IT set 2,000 - 4,000 4,000 - - - 8,000 PABU livestock housing upgrade unit 5,000 - 5,000 5,000 5,000 5,000 - 20,000 PABU building/ office unit 10,000 - 10,000 10,000 10,000 10,000 - 40,000 Housing upgrade for TSF flock (Term unit 2,000 - 2,000 2,000 2,000 2,000 - 8,000 Sire Flock) Housing upgrade for Male Flock flock 500 - 500 500 500 500 - 2,000 PFU and PFLU - 158,605 317,210 158,605 - - 634,420 PLFU Basic Eartags unit 1 - 3,000 6,000 3,000 - - 12,000 PLFU Basic Eartags Applicators unit 50 - 500 1,000 500 - - 2,000 PLFU Record book set unit 500 - 1,000 2,000 1,000 - - 4,000 PLFU Weighing Scales unit 1,000 - 2,000 4,000 2,000 - - 8,000 PLFU Marketing materials unit 200 - 200 400 200 - - 800 PFU Fodder plot (fence, well) unit 10,000 - 10,000 20,000 10,000 - - 40,000 PFU Tractor unit 20,000 - 20,000 40,000 20,000 - - 80,000 PFU Tractor Equipment unit 5,000 - 5,000 10,000 5,000 - - 20,000 PFU Feed processing equipment unit 2,000 - 2,000 4,000 2,000 - - 8,000 PFU Hay making equipment unit 5,000 - 5,000 10,000 5,000 - - 20,000 PFU Truck unit 10,000 - 10,000 20,000 10,000 - - 40,000 PFU Sprinkler irrigation unit 5,000 - 5,000 10,000 5,000 - - 20,000 PFU Water tank unit 1,000 - 1,000 2,000 1,000 - - 4,000 PFU Fodder plot establishment unit 5,000 - 5,000 10,000 5,000 - - 20,000 PFU Fodder Storage Facility unit 20,000 - 20,000 40,000 20,000 - - 80,000 PFU & PFLU deep well unit 10,000 - 10,000 20,000 10,000 - - 40,000 Geophysical Surveys well 505 - 505 1,010 505 - - 2,020 PFU office unit 5,000 - 5,000 10,000 5,000 - - 20,000 PFLU Livestock Feedlot unit 23,400 - 23,400 46,800 23,400 - - 93,600 PFLU Fodder Storage Facility unit 25,000 - 25,000 50,000 25,000 - - 100,000 PFLU office unit 5,000 - 5,000 10,000 5,000 - - 20,000 PCPU - 11,000 12,000 21,000 - - 44,000 PCPU: Bags and labels unit 1,000 - 1,000 2,000 1,000 - - 4,000 PCPU: PCPU sorting facility unit 10,000 - 10,000 10,000 20,000 - - 40,000 Total Base Cost - 2,088,077 2,356,677 1,649,990 1,158,510 - 3,451,674 a Excludes in-kind beneficiary contributions. PUG = pasture user group, RUA = rangeland user agreement, PVU = private veterinary unit, PLMU = private livestock marketing unit, PFU = private feeds unit, PFLU = private feedlot unit, PABU = private animal breeding unit, PCPU = private cashmere processing unit Source: Consultant’s estimates

B. Arkhangai Aimag Subproject

1. Current Situation

a. Overview

298. Arkhangai Aimag is located in the central economic region with an area of 55,314 km2 and borders with Zavkhan, Khuvsgul, Bulgan, Uvurkhangai and Bayankhongor Aimags. The highest

mountain in the aimag is Tarvagatai Mountain. The Orkhon, Khanui, Tamir and Chuluut rivers flow through the aimag territory and there are several the lakes including Ugii and Terkhiin Tsagaan.

Figure 23: Project Area in Arkhangai Aimag

Source: TRTA Consultant

299. Population. Arkhangai Aimag has a population of 95,994 people in 27,912 households, of which 14,978 are herder households. There are 19 soums in the aimag of which six— Khairkhan, Ulziit, Erdenemandal, Battsengel, Ugiinuur and Khashaat—are in the project area.

300. Erdenemandal Soum. Erdenemandal Soum is located 160 km from Arkhangai aimag center and 547 km from Ulaanbaatar City. The soum is located in the khangai region. The area of the soum is 3,363 km2, of which 255,391 ha is pastureland, 72,387 ha forest, 3,209 ha arable cropland and 1,372 ha abandoned cropland. There are 421 rivers and 1,415 lakes and ponds in the soum. Average annual precipitation is 277.9 mm. The soum is predominantly mountain steppe pastures. The average annual pasture yield is 46 kg/ha. About 31.5% of the pastureland is degraded to various extents. The annual carrying capacity of the soum pasture is 516,100 live sheep units, which was exceeded by 279% in 2019. The ratio of sheep to goats in 2019 was 3.1:1, which is similar to historical levels. In 2019, the soum prepared 6,000 tons of hay, 20 tons of grain feed, and 90 tons of hand-made fodder, equivalent to 6.7 kg of grass per live sheep unit, which would feed soum livestock for 13 days.

301. Khairkhan Soum. Khairkhan Soum is located 176 km from Arkhangai aimag center and 607 km from Ulaanbaatar City. The soum is located in the khangai region. The area of the soum is 2,544 km2, of which 195,486 ha is pastureland, 42,688 ha forest, 3,209 ha arable cropland and 18 ha abandoned cropland. There are 248 rivers, and 740 lakes and ponds ponds in the soum. 81

Average annual precipitation is 300 mm. The soum is predominantly mountain steppe pastures. The average annual pasture yield of the soum is 46 kg/ha. The annual carrying capacity of the soum pasture is 185,800 live sheep units, which was exceeded by 323% in 2019. About 10.6% of the pastureland is degraded to various extents. The ratio of sheep to goats is 2.5:1. In 2019, the soum prepared 4,638 tons of hay and 104.5 tons of hand-made fodder, equivalent to 4.6 kg of grass per live sheep unit, which would feed soum livestock for 9-10 days.

302. Battsengel Soum. Battsengel Soum is located 68 km from Arkhangai aimag center and 500 km from Ulaanbaatar City. The soum is located in the khangai region. The area of the soum is 3,536 km2, of which 315,145 ha is pastureland, 32,162 ha forest, 1,569 ha arable cropland and 1,750 ha abandoned cropland. The Bukhun Shar Mountain is a locally protected area. There are 348 rivers, 244 lakes and ponds and 244 springs in the soum. Average annual precipitation is 207.8 mm. The soum is predominantly mountain steppe pastures. The average annual pasture yield of the soum is 47 kg/ha. The annual carrying capacity of the soum pasture is 299,400 live sheep units, which was exceeded by 165% in 2019. About 28.9% of the pastureland has been degraded to various extents. The ratio of sheep to goats is 2.1:1. In 2019, the soum prepared 5,202 tons of forage, comprising 5,100 tons of hay, 10 tons of silage, 72 tons of feed grain and 104.5 tons of hand-made fodder. This would be sufficient to feed the total livestock 7.1 kg of grass per live sheep unit, which would feed the livestock for 14 days.

303. Ulziit Soum. Ulziit soum is located 68 km from Arkhangai aimag center and 550 km from Ulaanbaatar City. The soum is located in the khangai region. The area of the soum is 1,720 mm2, of which 161,683 ha is pastureland, 4,465 ha forest, 2,037 ha arable cropland and 1,414 ha abandoned cropland. There are 702 rivers, 188 lakes and ponds in the soum. Average annual precipitation is 250-280 mm. The soum is predominantly mountain steppe and meadow steppe. The average annual pasture yield of the soum is 45 kg/ha. The annual carrying capacity of the soum pasture is 158,000 live sheep units, which was exceeded by 251% in 2019. About 31.5% of the pastureland has been degraded to various extents. The ratio of sheep to goats is 1.9:1.

304. Ugiinuur Soum. Ugiinuur soum is located 100 km from Arkhangai aimag center and 360 km from Ulaanbaatar City. The soum is located in the khangai region. The area of the soum is 1,686 km2, of which 158,767 ha is pastureland, 998 ha arable cropland and 2,202 ha abandoned cropland. There are 300 rivers, and 3,249 lakes and ponds in the soum. Average annual precipitation is 280-300 mm. The soum is predominantly steppe small bunch grass. The average annual pasture yield of the soum is 49 kg/ha. The annual carrying capacity of the soum pasture is 179,300 live sheep units, which was exceeded by 172% in 2019. About 37.4% of the pastureland has been degraded to various extents. The ratio of sheep to goats is 1.8:1. In 2019, the soum prepared 2,975 tons of forage, comprising 2,895 tons of hay, 30 tons of green fodder and 70.2 tons of hand-made fodder. This was equivalent to 7.2 kg of grass per live sheep unit, which would feed the soum livestock for 15 days.

305. Khashaat Soum. Khashaat soum is located 190 km from Arkhangai aimag center and 360 km from Ulaanbaatar City. The soum is located in the khangai region. The area of the soum is 2,585 km2, of which 250,922 ha is pasture, 198 ha arable cropland and 2,854 ha abandoned cropland. Khushuu Tsaidam special protected area occupies and area of 31,000 ha. There are 54 rivers and springs and 60 lakes and ponds in the soum. Average annual precipitation is 280- 300 mm. The soum is predominantly steppe small bunch grass. The average annual pasture yield of the soum is 26 kg/ha. The annual carrying capacity of the soum pasture is 238,400, which was exceeded by 131% in 2019. Mice have spread to become a major pest in the pasturelands and about 37% of the pastureland has been degraded to various extents. The ratio of sheep to goats is 1.8:1. In 2019, the soum prepared 3,100 tons of forage, of which 3,000 tons was hay and 100

tons was hand-made fodder, equivalent to 5.9 kg of grass per live sheep unit, which would feed soum livestock for 10 days.

b. Natural Resources

306. The Arkhangai subproject area comprises 15,435 km2 (27% of the aimag territory), of which 1,337,394 ha is pastureland, 151,702 forest land and 7,968 ha water sources (Table 42).

Table 42: Land Classes in Arkhangai Subproject Area Soum Territory Pasture Forest Water bodies Cropland (ha) (ha) (ha) (ha) (ha) Erdenemandal 336,330 255,391 72,387 1,836 152 Khairkhan 254,430 195,486 42,688 988 3,209 Battsengel 353,553 315,145 32,162 572 1,569 Ulziit 172,037 161,683 4,465 890 2,037 Ugiinuur 168,648 158,767 - 3,568 998 Khashaat 258,454 250,922 - 114 198 Subproject total 1,543,452 1,337,394 151,702 7,968 8,162 % of aimag area 27 36 14 32 28 Aimag total 5,785,382 3,742,707 1,082,621 25,246 28,899 Source: Project Aimag Food and Agriculture Departments and the target soum governments

307. Land degradation conditions in the subproject soums in Arkhangai Aimag vary from level II to level III. Level II shows slight degradation, which means key dominants are still dominating, some grazing sensitive forbs are in decline and grazing resistant species are in increase. Level III indicates moderate degradation, which means the dominants are in decline and replaced by other subdominants, and the number of species is declining. The land recovery condition of the subproject area is class II, which indicates that the plant community is altered but may rapidly recovered in 3-5 growing seasons with favorable climatic conditions or a change in management.

308. Pasture degradation is a problematic issue in the subproject area. The degradation level is already between II and III in the Arkhangai subproject area, which indicates that the pasture conditions of Arkhanghai subproject area could be recovered into their initial conditions in 3-5 years. This is a key concern for the livestock sector in view of climate change induced frequency increase of severe weather events.

c. Livestock Management

309. The subproject area has a population of 22,874 persons (24% of the aimag population) in 7,002 households of which 4,894 are herder households (Table 43). Poverty incidence averages 28.9% in the subproject area and ranges between 18.7% in Khashaat and 38.2% in Khairkhan.

Table 43: Population and Households in Arkhangai Subproject Area Population Households Herder households Herders Poverty Soum (no.) (no.) (no.) (no.) (%) Battsengel 3,765 1,163 872 1,412 27.5 Erdenemandal 5,652 1,693 1097 1,770 29.8 Khairkhan 3,753 1,143 774 1,256 38.2 Khashaat 3,188 940 641 1,079 18.7 Ugiinuur 3,113 969 697 1,162 26.7 Ulziit 3,403 1,094 813 891 30.4 Total 22,874 7,002 4,894 7,570 29.0 83

Source: Project Aimag Food and Agriculture Departments and the target soum governments and Ministry of Labour and Social Protection 2020 for poverty

310. Herder groups. There are three herder groups with a total of 90 members and using 39% of the pasture area in the subproject area. On average, 39% of overall households enrolled to the herder groups(Table 44). About 1.7% of the herder households are members of herder groups, ranging between 0.4%% in Erdenemandal Soum and 6.7% in Ulziit Soum.

Table 44: Herder Groups in Arkhangai Subproject Area Erdene- Indicator Unit Khairkhan Battsengel Ulziit Ugiinuur Khashaat Overall mandal Total households no. 1,693 1,143 1,163 813 969 940 6,725 Herder households no. 1,484 774 944 813 697 824 5,332 Herder groups no. 1 1 1 0 0 0 3 Members no. 6 8 11 41 9 15 90 Coverage of herder % 0.4 1 1.2 6.7 1.3 1.8 1.7 groups Pasture used by % 15 80 20 11 6 100 39 herder groups Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

311. Pasture User Groups. There are 43 PUGs with 2,522 members in the subproject area, of which 8 are in Khairkhan soum, 9 in Battsengel soum, 3 in Ulziit soum, 9 in Ugiinuur soum and 14 in Khashaat soum (Table 45). About 52% of herder households are members of the PUGs. There are no Soum Pasture Associations in the subproject area.

Table 45: Pasture User Groups and Soum Pasture Associations in Arkhangai Subproject Area Pasture User Groups Membership of Soum Pasture Herder Soum Pasture User Number Members Associations families Groups Khairkhan 8 728 - 774 94% Battsengel 9 348 - 872 40% Ulziit 3 118 - 813 15% Ugiinuur 9 641 - 697 92% Khashaat 14 687 - 641 107% Total 43 2,522 - 4,894 52% Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

312. Cooperatives. There are 36 cooperatives in the subproject area with a total of 2,280 members (Table 46). On average, 40% of herder households are members of the cooperatives. Of these cooperatives, 25 are herder cooperatives with eight in Erdenemandal, three in Khairkhan, three in Battsengel, eight in Ugiinuur and three Khashaat soums. Herder cooperatives have 1,968 members, and average of 79 members per cooperative. Cooperatives do not undertake any pasture protection activities, but herders mainly joined to benefit from the government wool premiums through the cooperatives, so it more suitable to cooperate with them linking herders with processing factories.

Table 46: Cooperatives in Arkhangai Subproject Area Cooperatives Herder cooperatives Herder Enrollment in Soum Number Members Number Members households cooperatives Erdenemandal 8 700 8 700 1,097 64%

Cooperatives Herder cooperatives Herder Enrollment in Soum Number Members Number Members households cooperatives Khairkhan 6 176 3 150 774 19% Battsengel 3 359 3 359 872 41% Ulziit 3 24 - - 813 0% Ugiinuur 9 700 8 130 697 19% Khashaat 7 321 3 629 641 98% Total 36 2,280 25 1,968 4,894 40% Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

313. Forest User Groups. There are 3 forest user groups in the subproject area located in areas where there are project forest resources (Table 47). There is one group in Khairkhan Soum and two in Battsengel Soum. The purpose of the forest user groups is to protect the forest resources and not the pasture.

Table 47 Forest User Groups in Arkhangai Subproject Area Forest User Groups Herder Enrollment in Soum Number Members households Forest User Groups Khairkhan 1 15 774 2% Battsengel 2 - 872 0% Total 3 15 4,894 0% Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

d. Pasture Infrastructure

314. There are 353 engineering designed deep wells in the pasturelands, 120 springs, 123 lakes and ponds, 17 rivers, and there is indicated to be a need for an additional 172 deep wells in the subproject area (Table 48). These additional deep wells are required to ensure sufficient drinking water for livestock numbers within the carrying capacity and to relieve grazing pressure on pastures near existing wells. Pasture degradation will be reduced because currently underused pasture will be developed thus expanding the pasture area for livestock. Water supply for pastureland is in serious disrepair and urgently needs to be improved, not only as drinking water for livestock but also to reverse pasture degradation. Traditionally, individual water points are constructed for livestock watering including both high yielding engineering (deep) wells and shallow/hand-made wells. Due to a lack of maintenance, the engineering wells in particular have degraded since the transition period and the number of operational wells has sharply declined. This has forced herders to move their stock to areas around the operational wells and close to rivers. The carrying capacity of the pastures in these areas is far exceeded, causing serious land degradation.

Table 48: Water Points in Arkhangai Subproject Area Lakes and Additional Soum Deep wells Springs Rivers ponds wells required Erdenemandal 54 28 4 3 18 Khairkhan 78 4 78 5 30 Battsengel 54 45 1 2 63 Ulziit 21 16 7 4 15 Ugiinuur 45 27 34 3 31 Khashaat 101 17 3 5 15 Total 353 137 127 22 172 Source: Project Aimag Food and Agriculture Departments and the target soum governments

315. There are 1,885 livestock open enclosures without roof, 4,226 livestock semi-roofed enclosures, 1,549 livestock sheds, 1,326 camps with certificates of use, and 5 fodder storages in the subproject area (Table 49). Achievement to sustainable pasture management through reduction of livestock numbers and rehabilitation of degraded pasture requires both pasture improvement and improved livestock enclosures and sheds, and fodder storage.

Table 49: Animal Shelters and Storages in Arkhangai Subproject Area Open Semi-roofed Animal Camps with Fodder Soum enclosure enclosure shed certificate storage Erdenemandal 580 620 15 1 Khairkhan 1,070 300 3 452 1 Battsengel 165 926 1 611 1 Ulziit 27 850 - - 1 Ugiinuur 43 610 610 263 1 Khashaat - 920 920 - - Total 1,885 4,226 1,549 1,326 5 Source: Project Aimag Food and Agriculture Departments and the target soum governments

e. Livestock Numbers, Breeds and Output

316. Between 1990 and 2019 the livestock number in the subproject area increased by 338%, of which Erdenemandal Soum increased by 406%, Khairkhan Soum by 580%, Battsengel Soum by 299%, Ulziit Soum by 370%, Ugiinuur Soum by 277%, and Khashaat Soum by 205% (Table 50 and Figure 24).

Table 50: Total Livestock Number in Arkhangai Subproject Area for Selected Years Year Increase between Soum 1990 2000 2010 2019 1990 and 2019 Battsengel 108.8 197.6 194.8 433.7 299% Ugiinuur 86.1 135.7 152.7 324.5 277% Ulzii 75.2 107.5 149.6 353.2 370% Khairkhan 66.7 114. 188.5 453.5 580% Khashaat 122.1 153.5 225.1 372.3 205% Erdenemandal 110.4 192.4 263.5 558.5 406% Arkhangai subproject area 569.3 900.7 1,174.2 2,495.8 338% Source: National Statistics Office of Mongolia

Figure 24: Livestock Number Trend in Arkhangai Subproject Area

3,000,000

2,500,000

2,000,000 Khashaat Ugiinuur 1,500,000 Ulziit Battsengel 1,000,000 Numberlivestock of Khairkhan Erdenemandal 500,000

- 1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930 Years of 1990-2019

Source: National Statistics Office of Mongolia

317. There were 2.50 million livestock in the Arkhangai subproject area in 2019, equivalent to 4.03 million live sheep units. Details by type of livestock and by soum are in Table 51. Overall, the ratio of sheep to goats was 2.23:1 with individual soums varying between 1.80:1 in Khashaat and 3.12:1 in Erdenemandal.

Table 51: Livestock Numbers by Soum in 2019 Soum Horses Cattle Camels Sheep Goats Total Live Sheep Ratio Units sheep:goats Erdenemandal 32,473 35,513 30 371,382 119,095 558,493 919,107 3.12:1 Khairkhan 33,732 28,415 - 278,842 112,559 453,548 786,759 2.48:1 Battsengel 31,131 29,849 36 234,100 106,849 433,728 727,455 2.19:1 Ulzii 21,323 16,535 215 206,563 108,604 353,240 553,853 1.90:1 Khashaat 19,111 14,661 512 217,418 120,589 372,291 550,251 1.80:1 Ugiinuur 15,620 15,690 473 189,984 102,696 324,463 488,255 1.85:1 Total 153,390 140,663 1,266 1,498,289 670,392 2,495,763 4,025,680 2.23:1 Source: National Statistics Office of Mongolia

318. Each of the soums has a history of dzuds. Erdenemandal Soum lost livestock in 2000- 2001 and 2009-2010 dzud, but it is one of the leading soums in the aimag in terms of the number of livestock, which is five times higher than in 1990. In Khairkhan Soum, the natural conditions are relatively favorable, the number of livestock has increased 6.8 times in the last 30 years, in spite of dzuds in 2000-2001 and 2009-2010. In Battsengel soum, after the severe weather in 2000-2003, Battsengel soum had 143,393 head of livestock, but increased by 302% in the following16 years. Between 2000 and 2002, Uginuur Soum experienced temporary weather difficulties, resulting in a 50% loss of livestock in 1999 due to malnutrition

319. Breeds. While livestock in all of the soums are predominantly local breeds Battsengel soum has 416 sheep of Bayad breed and 650 sheep of Khotont breed. 87

320. Output. Herder households in Arkhangai subproject area sell an average of 170,000 head of livestock per year, of which one herder household sells an average of 100 head and the wealthy ones 450 head. Herder households supply an average of 2.5 tons of meat to the market annually. The subproject area produces a total of 190 tons of cashmere annually with each soum producing between 26 tons and 46 tons.

f. Inputs and Services

321. There are 15 private veterinary units (PVUs), and two private animal breeding units (PABUs) in the Arkhangai subproject area (Table 52). Legally, PVUs must provide general or specialized professional care and services in the field of prevention, diagnosis, treatment of all or certain types of animal diseases, combating infectious diseases, ensuring safety of animal originated raw materials19. They must be a legal entity with a veterinarian accredited to provide professional services, premises and equipment that meet the standard requirements. But these PVUs provide services comprising 32 baghs of the subproject soums with lower capacity than required in terms of equipment and premises. In accordance with the Law on Livestock Genetic Resources, PABUs should provide professional services such as identification and registration of livestock, inspection and classification of livestock, determination of pedigree, yield and quality, assessment of offspring characteristics, genetic assessments, verification of breeding results, development of breeding programs, selection of suitable breeder, and provide technical guidance and advice for herders, livestock owners and legal entities. The PABUs must have an accredited livestock specialist to provide professional services, and premises and equipment meet with standards.

Table 52: Private Veterinary and Animal Breeding Units in Arkhangai Subproject Area Soum No. Names Remarks PABU Remarks Tugs khand, Equipment for Tom Small animal AI tool Erdenemandal 3 Ar Bayan Erdene, primary examination selection (incomplete) Mandraa and sampling Equipment for Each has 1 Kheremtei, Khairkhan 2 primary examination veterinarian and 1 Avral Khairkhan and sampling technician Tahilgat nuuriin Ih buyan 3 veterinarian and 3 Battsengel 1 ovoo erdene technicians Sterilization Burdni shim Mal, disinfection automax, Ulziit 2 Mungun Bosgo bucks, portable refrigerators Ugii Tavan Each has 1 Erdene, veterinarian and 1 Ugiinuur 3 Ugiin Erdenet technician Sureg, Saruul ugii Tavan san, Bayan Tavan Refrigerator, surgery, Khashaat 4 Sakhia, syringe, vehicle Undur Tsaidam, Bagd Total 15 Source: Project Aimag Food and Agriculture Departments and the target soum governments, Feb-May 2020

19 The PVUs can also provide the special specialized veterinary care and services in mobile and localized means.

322. There are 17 trading entities in the subproject area but no individual carrying out trade in livestock products (Table 53).

Table 53 Traders of Livestock Products in Arkhangai Subproject Area Soum Traders of meat, by-products, wool and cashmere Erdenemandal Togskhand, Dersttsuur, Bomboozaisan, Tsegtstuuchee, Tugs 10 Ulziit Oron, and Shand Kharaat coops, Darkhan Tsokhio, Javkhlant Alltan Nar, Khangain Tavan Erdene, Khanui Khangai Buyan Khishig Khairkhan Bayan Mogoi, Khögjliin Tüüchee Khairkhan, and Duulga 3 Chandman coops Battsengel Bum Ravjikh, Chi Bod, Enkh Taivny Evseg Khüchtenüüd 3 Ulziit None - Ugiinuur None - Khashaat Erdene-Bayan Uguuj 1 Total 17 Source: TRTA Consultant, Feb-May 2020

g. Downstream Supply Chain

323. There are no abattoir, meat and dairy processing factories or workshops, or livestock feeding units in Arkhangai subproject area. However, there are eight fodder production businesses, one in Ulziit Soum and seven in Ugiinuur Soum.

324. The main problems identified in Arkhangai subproject area include: (i) lack of refrigerated storage and transport; (ii) no local buyers; (iii) no laboratory for testing meat; (iv) low price and unstable market situations; (v) remoteness from Ulaanbaatar; and (vi) lack of information on factory prices due to absence of representatives. Major buyers differ depending on location of the soums to the settlements, but typically Ulaanbaatar City is also a marketplace. Live animals are transported in warm seasons and carcasses in cold seasons. The cost of transportation to Ulaanbaatar and other issues are summarized in Table 54.

Table 54: Major Problem and Buyers in Arkhangai Subproject Area Soum Major problems Major buyers Transportation Erdenemandal No refrigerated Sells to middleman at central markets Transport costs are 7,000- transports, no of Ulaanbaatar, Arkhangai aimag, 10,000 MNT per small, and laboratory for Darkhan and Erdenet at negotiated 50,000-60,000 MNT per big testing meat, prices. animals. remoteness from Sells to local businesses in small Ulaanbaatar volume. Khairkhan Lack of information Sells to Darkhan, Erdenet, Transports: Мighty-3.5 tons, on factory prices Ulaanbaatar. FUSSO, Hino, Frontier, ISUZU, due to non- Sells to middleman who come to rural Daewoo, Kanter, Porter. existence of areas. Transport: 10,000 MNT per representatives. small, 50,000 MNT per big No local buyers. animals. Battsengel Low price, and no Sells to Emeelt and Khuchit Shonkhor Transports: Frontier, Porter etc. local buyers. markets in Ulaanbaatar. Transport cost: 5,000-10,000 MNT per for small, 50,000 MNT per big animals. Ulziit No regular buyer. Sells to middleman or deliver Transports: Мighty, Kanter, There are no local themselves to markets in Porter. buyers. Ulaanbaatar. Transport cost: 10,000 - 30,000 MNT per animals. 89

Soum Major problems Major buyers Transportation Ugiinuur No refrigerated Sells to middleman at markets in Transports: Porter, Bongo, storage and aimag center, Kharkhorin, and other microbus. transportation, no markets in Ulaanbaatar. Transport cost: 5,000-7,000 laboratory for Sells to local buyers, БО-SО and MNT per small, 25,000-30,000 testing meat Bayantsagaan shops, and MNT per big animals. G.Myagmar, in small volume. Khashaat Unstable market Sells to middleman at Emeelt and Transports: Porter, Bongo, situations Khuchit Shonkhor markets in Istana, microbus. Ulaanbaatar and local buyers. Transport cost: 200,000 MNT/ton Source: TRTA Consultant, Apr 2020

h. Local Legislation

325. In support of national legislation, the soums have approved and follow local local legislation (Table 55).

Table 55 Local Legislation in Arkhangai Subproject Area Soum Document Approved Erdenemandal Soum territorial development plan Citizens' Representative Meeting, (clause 4.2.1, 4.2.2, 4.2.3, 6.4, 6.4.1, Resolution No.04, 2019.12.13 6.4.2, 6.4.3, 6.4.4, 6.4.5) Five-year plan developed through IFAD project. Pasture release between Jun 1 and Oct 15. Khairkhan Seven-year soum development plan prepared through IFAD project. Bagh citizen's khural resolution on hayfield and reserve pasture. Battsengel Procedure on responsible pasture Citizens' Representative Meeting, Resolution No.XX, 2018.12.20 Bagh citizen's khural resolutions on pasture release. Ulziit Bagh citizen's khural resolutions on pasture reserve. Ugiinuur Khashaat Bagh citizen's khural resolutions on pasture reserve restrictions. Source: TRTA Consultant, Feb-May 2020

2. Subproject Targets

326. The Arkhangai Aimag subproject will have annual and end-of-project targets that relate to each of the soum sub-agreements. The end-of-project targets related to grazing management are shown in Table 56. These data will be updated during implementation and annual targets will also be developed during the aimag subproject planning meetings as per the aimag subproject template.

Table 56: Arkhangai: Targets Related to Grazing Management Sub-agreements Livestock Sheep Units (000s) No. Pasture User Groups Degradation Level (1-5) a Soum Baseline Target Baseline Target Baseline Target 2019 2027 2019 2027 2019 2027 Without Project Battsengel 792.0 792.0 12 12 2 3 Erdenemandal 919.1 919.1 12 12 2 3 Khairkhan 786.8 786.8 9 9 3 4 Khashaat 550.3 550.3 29 29 2 3 Ugiinuur 488.3 488.3 9 9 2 3 Ulzii 553.9 553.9 9 9 2 3 Total 4,090.2 4,090.2 80 80 2.2 3.2 With Project Battsengel 792.0 698.8 12 35 2 1 Erdenemandal 919.1 811.0 12 44 2 1 Khairkhan 786.8 694.2 9 31 3 2 Khashaat 550.3 485.5 29 26 2 1 Ugiinuur 488.3 430.8 9 28 2 1 Ulzii 553.9 488.7 9 33 2 1 Total 4,090.2 3,609.0 80 197 2.2 1.2 a Aimag degradation levels are the averages of the project soums. Source: Consultant’s estimates

327. The targets for second-generation sub-agreements (Table 57) assume that each soum will implement one of each.

Table 57: Arkhangai: Second-Generation Sub-agreements Targets No. No. PABU No. No. No. PFU Soum PLMU (Sheep/Goats/TSF) PFLU PCPU B T B T B T B T B T With Project Battsengel 0 1 1 1 0 1 0 1 0 1 Erdenemandal 0 1 1 1 0 1 0 1 0 1 Khairkhan 0 1 0 1 0 1 0 1 0 1 Khashaat 0 1 0 1 0 1 0 1 0 1 Ugiinuur 0 1 0 1 7 7 0 1 0 1 Ulzii 0 1 0 1 1 1 0 1 0 1 Total 0 4 2 6 0 4 0 4 0 4 PLMU = Private Livestock Marketing Unit: PABU = Private Animal Breeding Units; TSF = Terminal Sire Flock; PVU=Private Veterinary Units; PFU = Private Forage Units; PFLU = Private Feedlot Units; PCPU = Private Cashmere Processing Units; B = Baseline 2019; T = Targets at end of project period Source: TRTA Consultant

3. Subproject Activities

328. Seventy-two sub-agreements are expected to be implemented in Arkhangai subproject area (Table 58).

Table 58: Number and Type of Sub-Agreements in Arkhangai Aimag No. Sub-Agreement Type No. of Sub-agreements 1 Pasture User Group/Rangeland User Agreement Development 6 (1 per soum) 2 Pasture User Group/Rangeland User Agreement Implementation 36 (1 per bagh) 3 Private Veterinary Unit 6 (1 per soum) 4 Private Livestock Marketing Unit 6 (1 per soum) 5 Private Forage Unit and Private Feedlot Unit 6 (1 per soum) 6 Private Animal Breeding Unit 6 (1 per soum) 7 Private Cashmere Processing Unit 6 (1 per soum) Total 72 Source: TRTA Consultant

4. Subproject Implementation Schedule

329. The implementation schedule is shown in Table 59.

Table 59:Arkhangai Subproject Implementation Schedule Activities 2021 2022 2023 2024 2025 2026 2027 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 PMU operational Consulting Firm Operational Appoint Soum Steering Committee Appoint Soum Technical Team Aimag subproject workshops Soum Information campaign PUG/RUA Development Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Implement Activities PUG/RUA Implementation Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PVUs Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PLMU Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PFU and PLFU Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies

Activities 2021 2022 2023 2024 2025 2026 2027 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 Construct Civil Works Implement Activities Nucleus & Terminal Sire Flocks Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PCPU Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities Source: TRTA Consultant

5. Subproject benefits

330. Subproject benefits arise from (i) increased livestock output, and (ii) reduced greenhouse gas emissions and increased carbon sequestration due to natural resource recovery. Increased carcass weight and fiber weight is estimated in Table 60.

Table 60: Livestock Outputs Without- and With-Project in Arkhangai Subproject Area Year Livestock Turnoff (no.) Meat Production (tons) Fiber Production (tons) Sheep Goats Cattle Sheep Goats Cattle Wool Cashmere Without Project 286,174 126,499 19,143 5,131 1,774 2,125 674 109 With Project 2021 286,174 126,350 19,143 5,131 1,774 2,125 674 109 2022 286,174 126,350 19,143 5,131 1,774 2,125 674 109 2023 286,174 126,350 19,143 5,131 1,774 2,125 674 109 2024 329,268 145,649 23,292 6,040 2,092 2,648 688 108 2025 327,836 144,937 23,210 6,118 2,117 2,683 702 107 2026 325,920 143,592 23,047 6,213 2,146 2,728 705 106 2027 324,005 142,247 22,884 6,276 2,162 2,753 708 104 2028 319,983 140,307 22,642 6,338 2,182 2,790 719 103 2029 315,962 138,367 22,400 6,366 2,190 2,806 730 102 2030 310,883 136,065 22,049 6,405 2,202 2,830 739 101 2031 305,803 133,762 21,697 6,408 2,201 2,831 748 99 2032 299,753 130,980 21,316 6,421 2,205 2,849 754 97 2033 293,703 128,198 20,934 6,398 2,196 2,844 761 96 2034 286,764 125,055 20,447 6,386 2,191 2,846 764 94 2035 279,825 121,912 19,961 6,336 2,172 2,825 768 92 Source: TRTA Consultant

331. A major benefit of the project will be the protection of the natural resources for future generations, which is expressed as reduction in greenhouse gas emissions and increased carbon sequestration. It is expected that degradation levels will increase by one level in the without- project scenario, and decrease by one level in the with-project scenario (Table 61).

Table 61: Pasture Degradation Targets in Arkhangai Subproject Area Degradation Level (1-5) Soum Baseline Without Project With Project (2019) (2026) (2026) Battsengel 2 3 1 Erdenemandal 2 3 1 Khairkhan 3 4 2 Khashaat 2 3 1 Ugiinuur 2 3 1 Ulzii 2 3 1 Average 2.1 3.1 1.1 Source: TRTA Consultant

6. Subproject Cost

The Arkhangai subproject cost is estimated as $5,177,510. Base costs for each sub-agreement are shown in Table 62 and detailed costs are set out in Table 63.

Table 62: Costs of sub-agreements for Arkhangai Subproject Unit Value Units Value Sub-Agreement Unit ($) (no.) ($) PUG RUA Development soum 10,000 6 60,000 PUG RUA Implementation a bag 87,348 36 3,144,510 PVU soum 43,738 6 262,430 PLMU soum 80,115 6 480,690 PFU and PFLU and herder feeding soum 158,605 6 951,630 PABU soum 35,375 6 212,250 PCPU soum 11,000 6 66,000 Total 5,177,510 a Excludes in-kind beneficiary contributions PUG = pasture user group, RUA = rangeland user agreement, PVU = private veterinary unit, PLMU = private livestock marketing unit, PFU = private feeds unit, PFLU = private feedlot unit, PABU = private animal breeding unit, PCPU = private cashmere processing unit Source: Consultant’s estimates

Table 63: Detailed Costs by Year for Arkhangai Subproject Unit Cost by Year ($) Cost Total Sub-Agreement/Item Unit ($) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ($) PUG RUA Development - 30,000 15,000 15,000 - - 60,000 Information Materials herder 5 - 30,000 15,000 15,000 - - 60,000 PUG RUA Implementation a - 1,102,115 1,079,158 786,128 701,970 - 3,144,510 Basic Eartags (PUG) unit 1 - 9,000 18,000 9,000 - - 36,000 Basic Eartags Applicators (PUG) unit 50 - 1,350 2,700 1,350 - - 5,400 Record book set (PUG) unit 500 - 1,500 3,000 1,500 - - 6,000 Weighing Scales (PUG) unit 1,000 - 3,000 6,000 3,000 - - 12,000 Small hanging digital Scales (PUG) unit 15 - 15,750 31,500 15,750 - - 63,000 Cameras for Land Manager (Env Monitoring) set 5,000 - 7,500 7,500 7,500 7,500 - 30,000 Herder technical info and record books unit 12 - 12,600 12,600 12,600 12,600 - 50,400 Deep well rehabilitation wells 2,500 - 18,750 18,750 18,750 18,750 - 75,000 Winter Camp upgrade house 140 - 147,000 147,000 147,000 147,000 - 588,000 Hay fields materials herder 200 - 210,000 210,000 210,000 210,000 - 840,000 Technical Support Group office upgrade unit 10,000 - 15,000 15,000 15,000 15,000 - 60,000

Unit Cost by Year ($) Cost Total Sub-Agreement/Item Unit ($) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ($) Soum PUG office unit 10,000 - 15,000 15,000 15,000 15,000 - 60,000 Water/ wells unit 9,500 - 228,000 228,000 228,000 228,000 - 912,000 Geophysical Surveys well 505 - 12,120 12,120 12,120 12,120 - 48,480 Land Manager computers IT set 2,000 - 6,000 3,000 3,000 - - 12,000 Information Materials soum 4.00 - 24,000 12,000 12,000 - - 48,000 Soum Reserve area deep wells herder 10,000 - 30,000 15,000 15,000 - - 60,000 Geophysical Surveys well 505 - 1,515 758 758 - - 3,030 Soum Reserve area animal shelters shelters 2,500 - 45,000 22,500 22,500 - - 90,000 Soum Reserve area signboards unit 100 - 600 300 300 - - 1,200 Environmental Baseline Assessments ls 30,000 - 36,000 36,000 36,000 36,000 - 144,000 PVU 19,010 - 131,215 131,215 - - - 262,430 SAU computers IT set 2,000 - 6,000 6,000 - - - 12,000 SVU computers IT set 2,000 - 6,000 6,000 - - - 12,000 PVU marketing materials herder 2 - 5,215 5,215 - - - 10,430 PVU equipment and supplies unit 5,000 - 40,500 40,500 - - - 81,000 Animal Health Books herder 5 - 11,250 11,250 - - - 22,500 Technical booklet herder 3 - 6,750 6,750 - - - 13,500 PVU upgrade unit 5,000 - 40,500 40,500 - - - 81,000 Soum vaccine storage unit 5,000 - 15,000 15,000 - - - 30,000 PLMU - 123,173 123,173 117,195 117,150 - 480,690 Basic Eartags (PLMU) unit 1 - 15,000 15,000 15,000 15,000 - 60,000 Basic Eartags Applicators (PLMU) unit 50 - 1,500 1,500 1,500 1,500 - 6,000 Record book set (PLMU) unit 100 - 900 900 900 900 - 3,600 PLMU technical info manual unit 15 - 23 23 45 - - 90 Weighing Scales (PLMU) unit 900 - 5,400 5,400 5,400 5,400 - 21,600 Marketing materials (PLMU) unit 5 - 3,750 3,750 3,750 3,750 - 15,000 PLMU computers IT unit 2,000 - 6,000 6,000 - - - 12,000 Livestock Marketing Facility unit 20,000 - 30,000 30,000 30,000 30,000 - 120,000 PLMU Fodder Storage Facility unit 20,000 - 30,000 30,000 30,000 30,000 - 120,000 PLMU office unit 10,000 - 15,000 15,000 15,000 15,000 - 60,000 PLMU : Geophysical survey well 400 - 600 600 600 600 - 2,400 Deep wells unit 10,000 - 15,000 15,000 15,000 15,000 - 60,000 PABU - 56,363 56,363 49,763 49,763 - 212,250 PABU Basic Eartags unit 1 - 7,500 7,500 7,500 7,500 - 30,000 PABU Basic Eartags Applicators unit 50 - 150 150 150 150 - 600 PABU Weighing Scales unit 1,000 - 1,500 1,500 1,500 1,500 - 6,000 PABU Marketing materials set 200 - 300 300 300 300 - 1,200 PABU Small hanging digital Scales unit 15 - 225 225 225 225 - 900 SAU eqpt unit 1,000 - 1,500 1,500 1,500 1,500 - 6,000 Male Flock Basic Eartags unit 1 - 5,100 5,100 5,100 5,100 - 20,400 Male Flock Basic Eartags Applicators unit 50 - 1,350 1,350 1,350 1,350 - 5,400 Male Flock Weighing Scales unit 1,000 - 1,500 1,500 1,500 1,500 - 6,000 Male flock Technical manuals unit 10 - 300 300 - - - 600 PABU Technical manuals set 10 - 450 450 450 450 - 1,800 Basic Eartags (Term Sire Flock) unit 1 - 750 750 750 750 - 3,000 Basic Eartags Applicators (Term Sire Flock) unit 50 - 150 150 150 150 - 600 Record book set (TSF) unit 500 - 1,500 1,500 1,500 1,500 - 6,000 Weighing Scales (Term Sire Flock) unit 900 - 1,350 1,350 1,350 1,350 - 5,400 TSF Technical manuals unit 10 - 300 300 - - - 600 PABU signboard unit 125 - 188 188 188 188 - 750 PABU computers IT set 2,000 - 6,000 6,000 - - - 12,000 PABU livestock housing upgrade unit 5,000 - 7,500 7,500 7,500 7,500 - 30,000 PABU building/ office unit 10,000 - 15,000 15,000 15,000 15,000 - 60,000 Housing upgrade for TSF flock (Term Sire Flock) unit 2,000 - 3,000 3,000 3,000 3,000 - 12,000 Housing upgrade for Male Flock flock 500 - 750 750 750 750 - 3,000 PFU and PFLU - 237,908 475,815 237,908 - - 951,630 PLFU Basic Eartags unit 1 - 4,500 9,000 4,500 - - 18,000 95

Unit Cost by Year ($) Cost Total Sub-Agreement/Item Unit ($) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ($) PLFU Basic Eartags Applicators unit 50 - 750 1,500 750 - - 3,000 PLFU Record book set unit 500 - 1,500 3,000 1,500 - - 6,000 PLFU Weighing Scales unit 1,000 - 3,000 6,000 3,000 - - 12,000 PLFU Marketing materials unit 200 - 300 600 300 - - 1,200 PFU Fodder plot (fence, well) unit 10,000 - 15,000 30,000 15,000 - - 60,000 PFU Tractor unit 20,000 - 30,000 60,000 30,000 - - 120,000 PFU Tractor Equipment unit 5,000 - 7,500 15,000 7,500 - - 30,000 PFU Feed processing equipment unit 2,000 - 3,000 6,000 3,000 - - 12,000 PFU Hay making equipment unit 5,000 - 7,500 15,000 7,500 - - 30,000 PFU Truck unit 10,000 - 15,000 30,000 15,000 - - 60,000 PFU Sprinkler irrigation unit 5,000 - 7,500 15,000 7,500 - - 30,000 PFU Water tank unit 1,000 - 1,500 3,000 1,500 - - 6,000 PFU Fodder plot establishment unit 5,000 - 7,500 15,000 7,500 - - 30,000 PFU Fodder Storage Facility unit 20,000 - 30,000 60,000 30,000 - - 120,000 PFU & PFLU deep well unit 10,000 - 15,000 30,000 15,000 - - 60,000 Geophysical Surveys well 505 - 758 1,515 758 - - 3,030 PFU office unit 5,000 - 7,500 15,000 7,500 - - 30,000 PFLU Livestock Feedlot unit 23,400 - 35,100 70,200 35,100 - - 140,400 PFLU Fodder Storage Facility unit 25,000 - 37,500 75,000 37,500 - - 150,000 PFLU office unit 5,000 - 7,500 15,000 7,500 - - 30,000 PCPU - 16,500 18,000 31,500 - - 66,000 PCPU: Bags and labels unit 1,000 - 1,500 3,000 1,500 - - 6,000 PCPU: PCPU sorting facility unit 10,000 - 15,000 15,000 30,000 - - 60,000 Total Base Cost - 3,132,116 3,535,016 2,474,985 1,737,765 - 5,177,510 a Excludes in-kind beneficiary contributions PUG = pasture user group, RUA = rangeland user agreement, PVU = private veterinary unit, PLMU = private livestock marketing unit, PFU = private feeds unit, PFLU = private feedlot unit, PABU = private animal breeding unit, PCPU = private cashmere processing unit Source: Consultant’s estimates

C. Uverkhangai Aimag Subproject

1. Current Situation

a. Subproject Overview

332. Uvurkhangai Aimag is located in the central part of the country with an area of 62,895 km2 and borders with Bayankhongor, Arkhangai, Bulgan, Tuv Dundgovi and Umnugovi aimags. The highest mountains in the aimag are Khitruun, Bituug, Bagabogd and Myangan Yamaat. The Ongi, Taats and Ar Aguit rivers flow through the aimag, while the main lakes are Naiman Nuur and Taatsiin Tsagaan Nuur and the spars include Khujirt, Mogoit, Khitruun, Khuremt, Taats, Must, Khuren Khad, Khorkhoin Turuu and Takhiin (Figure 25).

Figure 25: Project Target Area in Uvurkhangai Subproject Area

Source: TRTA Consultant

333. Population. Uvurkhangai Aimag has a population of 116,645 people in 34,652 households, of which 16,395 are herder households. There are 19 soums in the aimag of which five—Baruunbayanulaan, Guchin-Us, Nariinteel, Taragt and Khairkhandulaan—are in the subproject area.

334. Baruunbayanulaan Soum. Baruunbayanulaan Soum is located 195 km from Uvurkhangai aimag center and 625 km from Ulaanbaatar City. The soum has in the govi region. The area of the soum is 3,939 km2, of which 387,209 ha is pastureland, 3,100 ha forest, 28 ha arable cropland and 26 ha abandoned cropland. The soum borders with Bogd, Guchin-Us, Khairkhandulaan, and Nariinteel soums. There are 177 rivers and springs, 1,512 lakes and ponds in the soum but most are seasonal. The average annual precipitation is 50.3 mm. The soum is predominantly grass- semi-shrub-semi shrub, desert rangeland shrub types. The average annual pasture yield of the soum is 17 kg/ha. The average annual carrying capacity of the soum pasture is 167,300 live sheep units, which exceeded by 59% in 2019. The inter-soum pasture of 32,000 ha is located in this soum. About 26.5 % of the pastureland has been degraded to various extents. The ratio of sheep to goats is 0.68:1. In 2019, the soum prepared 570 tons of forage, of which 385 tons was of hay and 185 tons of hand-made fodder. They also purchased 610 tons of hay and 120 tons of feed grain from outside the soum. The fodder prepared by the soum is equivalent to 3 kg of grass per live sheep unit (5.9 kg including purchased fodder), sufficient to feed the soum livestock for 10 days.

335. Guchin-Us Soum. Guchin-Us Soum is located 105 km from Uvurkhangai aimag center and 530 km from Ulaanbaatar City. The soum is located in both the gov and steppe regions with steppe light brown and govi brown and saline soils. The area of the soum is 4,751 km2, of which 463,604 ha is pastureland, 8,800 ha forest and 143 ha abandoned cropland. The soum borders with Bogd, Tugrug, Baruunbayanulaan, and Khairkhandulaan soums. There are 66 rivers and springs, 260 registered lakes and ponds but they are mostly seasonal. The average annual 97

precipitation is 150-200 mm. The average annual pasture yield of the soum is 17 kg/ha. The average annual carrying capacity of the soum pasture is 255,700 live sheep units, which was exceeded by 24% in 2019. About 26.5 % of the pastureland has been degraded to various extents. The ratio of sheep to goats is 0.94:1. In 2019, the soum prepared 70 tons of hand-made fodder and purchased 1,620 tons of hay and 40 tons of feed grain from outside the soum. The fodder prepared by the soum when converted to hay is equivalent to 5.4 kg of grass per live sheep unit, which would feed soum livestock for a few days.

336. Nariinteel Soum. Nariinteel Soum is located 135 km from Uvurkhangai aimag center and 555 km from Ulaanbaatar City. About 60% of the soum area is in the steppe region and 30% in the khangai region. The main soil types are light brown, mountain brown, meadow steppe, and some alpine soils, as well as desert steppe brown soils in limited areas. The area of the soum is 2,703 km2, of which 264,082 ha is pastureland, 34 ha arable cropland and 10 ha abandoned cropland. The soum borders with Baruunbayanulaan, Khairkhandulaan, Uyanga, and Ulziit soums. There are 68 rivers and springs, and 231 lakes and ponds in the soum. The average annual precipitation is 200-300 mm. The soum has a continental climate. Vegetation is predominantly small bunch grass, forb-grass- kobrisia rangeland and forest of Larix and Pinus. The average annual pasture yield of the soum is 10-28 kg/ha. The average annual carrying capacity of the soum pastureland is 211,500 live sheep units and was exceeded by 59% in 2019. About 40.3% of the pasture has been degraded to various extents. The ratio of sheep to goats is 0.71:1. In 2019, the soum prepared 257 tons of forage, of which 223 tons was hay and 34 tons hand-made fodder. The fodder prepared by the soum when converted to hay is equivalent to 0.9 kg of grass per live sheep unit.

337. Taragt Soum. Taragt Soum is located 35 km from Uvurkhangai aimag center and 420 km from Ulaanbaatar City. The soum borders with Uyanga, Khairkhandulaan, Zuunbayanulaan, Arvaikheer soums. About 67% of the soum is in the khangai region and about 33% is in the govi region. The area of the soum is 3,392 km2, of which 306,925 ha is pastureland, 1 ha forest, 312 ha arable cropland and 2,086 ha abandoned cropland. There are 62 rivers and springs, and 377 lakes and ponds in the soum. The average annual precipitation is 216 mm. The soum has a continental climate. The pasture types include mountain steppe Festuca and forb- small bunch grass. The average annual pasture yield of the soum is 41 kg/ha. The average annual carrying capacity of the soum pastureland is 309,700 live sheep units and was exceeded by 24% in 2019. About 22% of the pasture has been degraded to various extents. The ratio of sheep to goats is 1.36:1. In 2019, the soum prepared 577 tons of hay and 275 tons hand-made fodder. The fodder prepared by the soum when converted to hay is equivalent to 1.5 kg of grass per live sheep unit.

338. Khairkhandulaan Soum. Khairkhandulaan Soum is located 73 km from Uvurkhangai aimag center and 510 km from Ulaanbaatar City. The soum borders with Uyanga, Baruunbayanulaan, Taragt, Tugrug, Guchin-Us, and Nariinteel soums. The soum is located about 40% in the khangai region and 60% is the steppe region. Soils are carbonate light brown in the north, and thin black and light brown in the center and south, together with meadow along the rivers. The area of the soum is 4,138 km2, of which 408,315 ha is pastureland, 766 ha forest and 124 ha arable cropland. There are 166 rivers and springs, and 333 lakes and ponds in the soum. The average annual precipitation is 150-200 mm and the soum has a continental climate. The pasture includes caragana-grass, and in central and northern parts bunch steppe-forb-grass. The average annual pasture yield of the soum is 22 kg/ha. The average annual carrying capacity of the soum pastureland is 218,800 live sheep units and was exceeded by 103% in 2019. About 27.4% of the pasture has been degraded to various extents. The ratio of sheep to goats is 0.91:1. In 2019, the soum prepared 3,200 tons of forage, of which 2,150 tons was hay and 1,050 tons hand-made fodder. The fodder prepared by the soum when converted to hay is equivalent to 7.8

kg of grass per live sheep unit, which is enough for feeding soum livestock for 10 days.

b. Natural Resources

339. The Uvurkhangai subproject area comprises 18,925 km2 (30% of the aimag territory), of which 1,830,136 ha is pastureland, 12,667 ha forest land and 3,255 ha of water sources (Table 64).

Table 64: Land Classes in Uvurkhangai Subproject Area Soum Territory Pasture Forest Water bodies Cropland (ha) (ha) (ha) (ha) (ha) Baruunbayanulaan 393,890 387,209 3,100 1,689 28 Guchin-Us 475,096 463,604 8,800 326 - Nariinteel 270,341 264,082 - 299 34 Taragt 339,221 306,925 1 440 2,086 Khairkhandulaan 413,768 408,315 766 500 124 Subproject total 1,892,471 1,830,135 12,667 3,255 2,272 % of aimag area 30 32 8 39 9 Aimag total 6,289,533 5,641,463 150,794 8,248 25,468 Source: Project Aimag Food and Agriculture Departments and the target soum governments

340. Land degradation conditions in the subproject soums in Uvurkhangai Aimag varies from level I to level III. Level I means no degradation with all dominants are in place. Level III means moderate degradation where the dominants are in decline and replaced by subdominants: the number of species is declining. The land recovery category of subproject soums varies from class I to class IV. Class I indicates that the plant community is at or near reference conditions (non- degraded) or requires 1-3 growing seasons for recovery from minor changes (slightly degraded) and matching stocking rates to forage supply and use with temporary seasonal deferment as needed. Class IV indicates that the plant community is altered due to the local loss of key plant species, invasion of noxious plant species, or alteration of hydrology that is unlikely to be recovered for over a decade to many decades without intensive interventions such as species removal, seeding, or manipulations to recover historical hydrological functions.

341. Pasture degradation is a problematic issue in the subproject soums. The degradation level is already between I and III in subproject soums of Uvurkhangai Aimag, which indicates that the pasture conditions of the subproject area could be recovered to their initial conditions in 10 or more years. This is a key concern for the livestock sector in view of climate change induced frequency increase of severe weather events.

c. Livestock Management

342. The subproject area has a population of 15,296 persons (13% of the aimag population) in 4,468 households of which 3,286 are herder households (Table 65). Poverty incidence averages 35.0% in the Uvurkhangai subproject area and ranges between 27.6% in Nariinteel and 38.7% in Baruunbayanulaan soums.

Table 65: Population and Households in Uvurkhangai Subproject Area Population Households Herder households Herders Poverty Soum (no.) (no.) (no.) (no.) (%) Baruunbayanulaan 2,832 710 519 908 38.7 Guchin-Us 2,209 640 524 711 35.4 Nariinteel 3,598 1,042 626 1,241 27.6 99

Population Households Herder households Herders Poverty Soum (no.) (no.) (no.) (no.) (%) Taragt 3,155 955 817 1,363 39.5 Khairkhandulaan 3,502 1,121 800 1,428 35.0 Total 15,296 4,468 3,286 5,651 35.0 Source: Project Aimag Food and Agriculture Departments and the target soum governments and Ministry of Labour and Social Protection 2020 for poverty

343. Herder Groups. There are 36 herder groups in the subproject area with a total of 423 members who use 14% of the pasture area (Table 66). Overall, 13% of herder households are members of the herder groups with membership ranging from 5% in Khairkhandulaan to 34% in Nariinteel.

Table 66: Herder Groups in Uvurkhangai Subproject Area Khairkhan Guchin- Baruun Indicators Unit Taragt Nariinteel Overall dulaan Us bayanulaan Total households no. 955 1,121 988 614 711 4,389 Herder households no. 817 812 623 447 503 3,202 Herder groups no. 8 6 9 6 7 36 Members no. 52 40 209 54 68 423 Coverage of herder groups % 6 5 34 12 14 13 Pasture used by herder groups % 9 5 51 9 12 17 Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

344. Pasture User Groups. There are no pasture user groups or Soum Pasture Associations in the subproject area.

345. Cooperatives. There are 40 cooperatives in the subproject area with a total of 1,177 members (Table 67). On average, 41% of herder households are members of the cooperatives. Of these cooperatives, 14 are herder cooperatives, one in Baruunbayanulaan, five in Guchin-Us, seven in Nariinteel and one in Taragt soums. Cooperatives do not undertake any pasture protection activities, but herders mainly joined to benefit from the government wool premiums through the cooperatives, so it more suitable to cooperate with them linking herders with processing factories.

Table 67: Cooperatives in Uvurkhangai Subproject Area Cooperatives Herder cooperatives Herder Enrollment in Soum househol Number Members Number Members cooperatives ds Baruunbayan-Ulaan 4 197 1 749 519 144% Guchin-Us 8 240 5 168 524 32% Nariinteel 11 519 7 374 626 60% Taragt 6 122 1 54 817 7% Khairkhandulaan 11 99 800 0% Total 40 1,177 14 1,345 3,286 41% Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

346. There are three forest user groups in the subproject area, all in Baruunbayanulaan soum.

d. Pasture Infrastructure

347. There are 198 engineering designed deep wells in the pasturelands, 196 springs, 10 lakes and ponds, and 34 rivers, but there is indicated to be a need for an additional 79 deep wells in

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the subproject area (Table 68). These additional deep wells are required to ensure sufficient drinking water for livestock numbers within the carrying capacity and to relieve grazing pressure on pastures near to existing wells. Pasture degradation will be reduced because currently underused pasture will be developed thus expanding the pasture area for livestock. Water supply for pasturelands is in serious disrepair and urgently needs to be improved, not only as drinking water for livestock but also to reverse pasture degradation. Traditionally, individual water points are constructed for livestock watering including both high yielding engineering (deep) wells and shallow/hand-made wells. Due to a lack of maintenance issues the engineering type wells in particular have degraded since the transition period and the number of operational wells has sharply declined. This has forced herders to move their stock to areas around the operational wells and close to rivers. The carrying capacity of the pastures in these areas is far exceeded, causing serious land degradation.

Table 68: Water Points in Uvurkhangai Subproject Area Soum Deep wells Springs Lake & ponds Rivers Additional wells required Baruunbayanulaan 22 11 3 2 13 Guchin-Us 28 3 - 1 18 Nariinteel 34 10 - 3 6 Taragt - 82 4 19 9 Khairkhandulaan 114 90 3 9 10 Total 198 196 10 34 56 Source: Project Aimag Food and Agriculture Departments and the target soum governments

348. There are 1,770 livestock open enclosures without roof, 1,566 livestock semi-roofed enclosures, 1,603 camp with certificates of use, and 8 fodder storages in the subproject area (Table 69). Achievement of sustainable pasture management through reduction of livestock numbers and rehabilitation of degraded pasture requires both pasture improvement and improved livestock enclosures and sheds, and fodder storage.

Table 69: Animal Shelters and Storages in Uvurkhangai Subproject Area Open Semi-roofed Animal Camps with Fodder Soum enclosure enclosure shed certificate storage Baruunbayanulaan 470 392 - 402 4 Guchin-Us 136 400 - 536 1 Nariinteel 100 380 - 665 - Taragt 480 320 - - 1 Khairkhandulaan 584 74 - - 2 Total 1,770 1,566 - 1,603 8 Source: Project Aimag Food and Agriculture Departments and the target soum governments

e. Livestock Numbers, Breeds and Output

349. Between 1990 and 2019 the livestock number in the subproject area increased by 165%, of which in Baruunbayanulaan Soum increased by 138%, Guchin-Us Soum by 162%, Nariinteel Soum by 193%, Taragt Soum by 122%, and Khairkhandulaan Soum by 217% (Table 70 and Figure 26).

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Table 70: Total Livestock Number in Uvurkhangai Subproject Area for Selected Years Year Increase between Soum 1990 2000 2010 2019 1990 and 2019 Baruunbayanulaan 83.3 126.3 105.9 198.5 138% Guchun-Us 89.9 108.8 86.2 235.5 162% Nariinteel 76.1 149.2 146.6 222.8 193% Taragt 113.1 89.7 55.3 251.6 122% Khairkhandulaan 98.4 121.8 122.2 312.0 217% Bulgan subproject area 460.9 595.9 516.1 1220.5 165% Source: National Statistics Office of Mongolia

Figure 26: Livestock Number Trends in Uvurkhangai Subproject Area

1,400,000

1,200,000

1,000,000

800,000 Khaikhandulaan Taragt 600,000 Nariinteel

Livestock Livestock number Guchin-Us 400,000 Barunbayanulaan

200,000

- 1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930 Axis Title

Source: National Statistics Office of Mongolia, Feb-May 2020

350. There were 1.21 million livestock in the Uvurkhangai subproject area in 2019, equivalent to 1.74 million live sheep units. Details by type of livestock and by soum are in Table 71. Overall, the ratio of sheep to goats was 0.92:1 with individual soums varying between 0.68:1 in Baruunbayanulaan and 1.36:1 in Taragt. Baruunbayanulaan and Guchin-Us soums are in an ecologically suitable region for goat breeding, so the proportion of goats in the total livestock is much higher than in khangai and steppe soums. In Nariinteel Soum, the ecological conditions, pastures with fine grasses, are ideal for sheep but goats dominate the herd, disrupting traditional structures. In Taragt Soum ecological conditions are suitable for cattle and sheep, but goats have become of increasing importance with an impact on herd structure.

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Table 71: Livestock Numbers by Soum in 2019 Soum Horses Cattle Camels Sheep Goats Total Live Sheep Ratio Units sheep:goats Baruunbayanulaan 6,867 4,218 4,007 74,450 109,005 198,547 265,967 0.68:1 Guchin-Us 84,847 3,458 5,886 105,192 112,459 235,479 315,971 0.94:1 Nariinteel 11,695 10,761 74 82,722 116,550 221,802 334,418 0.71:1 Taragt 16,280 8,513 105 130,498 96,237 251,633 382,674 1.36:1 Khairkhandulaan 15,630 10,523 200 135,989 141,227 303,569 436,641 0.96:1 Total 135,319 37,473 10,272 528,851 575,478 1,211,030 1,735,671 0.92:1 Source: National Statistics Office of Mongolia

351. Each of the soums has a history of dzuds. In Baruunbayanulaan Soum, the 2009-10 dzud killed nearly 30% of livestock but the number has more than recovered in the following nine years. A similar situation is observed in Guchin-Us Soum. Nariinteel Soum lost 57.5% of livestock during the 2003-04 dzud compared to the number at the beginning of the year. These numbers have subsequently recovered. In Taragt Soum the dzud of 2009-10, resulted in the loss of 65.9% of livestock but this was again followed by a rapid recovery. In Khairkhandulaan Soum, 35% of livestock at the beginning of the year were lost during the 2009-10 dzud.

352. Breeds. Despite of the predominance of local livestock breeds, there are 6,000 Barga sheep and more than 5,000 Gobi Gurvan Saikhan goats in Baruunbayanulaan Soum; and 11,250 heads of Barga breed sheep, 12,300 heads of Gobi Gurvan Saikhan breed goats, and 127 heads of Shar Tarlan breed cattle in Guchin-Us Soum.

353. Output. Herder households in Uvurkhangai subproject area sell an average of 220,000 head of livestock per year. Each herder household sells an average of 110 head with the wealthy households selling 200 head. Herder households supply 3 tons of meat to the market annually. The subproject area produces about 220 tons of cashmere annually with each soum producing about 40 tons.

f. Inputs and Services

354. There are 12 PVUs and one private animal breeding unit in the subproject area (Table 72). Legally, PVUs must provide general or specialized professional care and services in the field of prevention, diagnosis, treatment of all or certain types of animal diseases, combating infectious diseases, ensuring safety of animal originated raw materials20. They must be legal entities with veterinarian accredited to provide professional services, premises and equipment that meet the standard requirements. The PVUs provide services in 27 baghs of the subproject area with lower capacity than required in terms of equipment and premises. In accordance with the Law on Livestock Genetic Resources, the PABUs should provide professional services such as identification and registration of livestock, inspection and classification of livestock, determination of pedigree, yield and quality, assessment of offspring characteristics, genetic assessments, verification of breeding results, development of breeding programs, selection of suitable breeder, and provide technical guidance and advice for herder, livestock owners and legal entities. The PABU must have an accredited livestock specialist to provide professional services, and premises and equipment meeting with standards.

20 The PVUs can also provide the special specialized veterinary care and services in mobile and localized means. 103

Table 72: Private Veterinary Service Units in Uvurkhangai Subproject Area Soum No. Names Remarks PABU Remarks Baruunbay 1 Bayanbudargana Vehicle, moto pump, veterinary Veterinary-1, anulaan vase, portable cooler, portable sanatory-3 treatment fence Guchin-Us 1 Uush Shahlag Office, vehicle, equipment 1 Tuseg Khairkhan LLC Nariinteel 2 Bumbat Ur, Bumbat Moto pump, veterinary vase, Suvraga portable treatment fence, cooler Taragt 6 Taragt Jirem, Taragt Jirem: auto max, vehicle, Veterinary 1-3, Doviin Khundii, moto pump, office, personal sanatory-1-3 Taragt-Arvai, protective gear; Khurdan kheer, Doviin Khundii: auto max, sprayer, Duuren Arvin buyan, treatment vase, vehicle, office, Jirem personal protective gear; Taragt-Arvai: treatment vase, vehicle, office, personal protective gear; Khurdan kheer: auto max, sprayer, vehicle, office, personal protective gear; Duuren Arvin buyan: auto max, vehicle, treatment vase, moto pump, office, personal protective gear; Khairkhan 2 Tunkher huush, Each has dulaan Ikh Chandmani Undur Veterinary-1, sanatory-3 Total 11 Source: TRTA Consultant survey, Dec 2019-May 2020

355. There are 15 trading entities and one citizen trades in livestock products in the subproject area (Table 70).

Table 73: Traders of Livestock Products in Uvurkhangai Subproject Area Soum Traders of meat, by-products, wool and cashmere Individuals and legal entities for primary processing Baruunbayanulaan Ushig khairkhani orgil, and Altannugadavaa coops, 2 Ushgug Khairkhany Orgil LLC Guchin-Us Guchin-Erdene, Dayantyn Nuruu, Mandakh Zam 4 Uul, and Molom Tailag Khairkhan coop brokers, Nariinteel Ar Ultiin Teel, Udgantbayan, Khadgiin Teeg, 7 Chuluut Teel, Mandukhain Shivee, Ulaitai Khajuu Bulag, and Bilegt Taats coops Taragt Ulziit khairkhani khishig, and Dulaan Khairkhani 2 Milk 1 Buyan coops processing Khairkhandulaan None Total 15 1 Source: TRTA Consultant, Feb-May 2020

g. Downstream Supply Chain

356. There are no abattoirs, meat processing factories, workshops or livestock feeding units in

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the target soums of Uvurkhangai aimag. There is one dairy processing unit in Taragt, two households who run fodder production businesses (one in Taragt and the other in Baruunbayanulaan), and 1 fodder business entity in Baruunbayanulaan Soum.

357. The major problems in Uvurkhangai subproject area include: (i) no integrated sales system; (ii) lack of a stable price with low prices paid by middleman and high price fluctuations; and (iii) no local abattoir. The major buyers differ depending on the location of the soums to the settlements, but typically Ulaanbaatar is a marketplace. Live animals are transported in warm seasons and carcasses in cold seasons. The cost of transportation to Ulaanbaatar and other issues is summarized in Table 74.

Table 74: Major Problem and Buyers in Uvurkhangai Subproject Area Soum Major problems Major buyers Transportation Baruunbayan No integrated Sells to middleman at central markets Transports: different lorries. ulaan sales system of aimag center, and Ulaanbaatar. Transport cost: 15,000-20,000 Mostly sell in winter period. MNT per animal. Guchin Us No stable price, no Sells to middleman of central markets Transports: different lorries. integrated sale of aimag center, and to middleman Transport cost: 15,000-20,000 system, low price who sell meat to Ulaanbaatar at the MNT per animal. of middleman herder camps. Sells to aimag abattoir in small volume. Nariinteel High changes in Sells to representatives of meat Transports: different lorries. prices markets of Ulaanbaatar at the herder Transport cost: 500,000- camps. 1,000,000 MNT Sells to markets in aimag center Emeelt in Ulaanbaatar. Taragt No integrated Sells to aimag meat factory, and Transports: Porter, Bongo. system of supply, aimag middleman. lower price than market price Khairkhan Low price, Sells to meat factory, middleman at Transports: Big track. dulaan middleman, no markets, and restaurant and cafeteria. Transport cost: 1,000MNT per local abattoir small, 2,5000-30,000 MNT per big animals. Source: TRTA Consultant, Apr 2020

h. Local Legislation

358. In support of national legislation, the soums have approved and follow local legislation (Table 75).

Table 75 Local Legislation in Uvurkhangai Subproject Area Soum Document Approved Baruunbayanulaan Bagh citizen's khural resolutions on pasture Citizens' Representative release, recovery and protection Meeting, Resolution

Guchin-Us Bagh citizen's khural resolutions on pasture Citizens' Representative release, recovery and protection Meeting, Resolution Nariinteel Soum Governor's Action Plan: Support herders 2016 and citizens initiatives to improve pastureland land management based on pastureland carrying capacity and condition assessment, and to increase reserve pastures, rational use and fencing for pasture protection 105

Soum Document Approved Pasture responsibility procedure Pasture management plan Taragt Soum territorial development plan: Article 1. Citizens' Representative Land management planning of the Agricultural Meeting, Resolution No.13/01, Department 2019 Pasture release, carrying capacity reserve Citizens' Representative establishment resolution Meeting, Resolution, 2019 Soum Governor's Action Plan 2016-2020: Citizens' Representative 2.2.2. Effectively manage pastoral livestock in Meeting, Resolution No.12/01, accordance with market demand, regional 2016 environment and pasture carrying capacity Khairkhandulaan Soum development plan Source: TRTA Consultant, Feb-May 2020

2. Subproject Targets

359. The Uvurkhangai Aimag subproject will have annual and end-of-project targets that relate to each of the soum sub-agreements. The end-of-project targets related to grazing management are shown in Table 76. These will be updated during implementation and annual targets will also be developed during the aimag subproject planning meetings as per the aimag subproject template. In the table it is assumed that there will be 25 households per PUG, and that 80% of households form PUGs.

Table 76: Uvurkhangai: Targets Related to Grazing Management Sub-agreements Livestock Sheep Units No. Pasture User Groups Degradation Level (1-5) a (000s) Soum Baseline Target Baseline Target Baseline Target 2019 2027 2019 2027 2019 2027 Without Project Baruunbayab-Ulaan 266.0 266.0 - - 1 2 Guchun-Us 316.0 316.0 - - 1 2 Khairkhandulaan 444.3 444.3 - - 2 3 Nariinteel 336.1 336.1 - - 2 3 Taragt 382.7 382.7 13 13 3 4 Total 1,744.9 1,744.9 13 13 1.8 2.8 With Project Baruunbayab-Ulaan 266.0 234.7 0 21 1 1 Guchun-Us 316.0 278.8 0 21 1 1 Khairkhandulaan 444.3 392.0 0 32 2 1 Nariinteel 336.1 296.5 0 25 2 1 Taragt 382.7 337.7 13 33 3 2 Total 1,744.9 1,539.7 13 132 1.8 1.2 a Aimag degradation levels are the averages of the project soums. Source: TRTA Consultant

360. The targets for second-generation sub-agreements (Table 77) assume that each soum will implement one of each.

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Table 77: Uvurkhangai: Second-Generation Sub-agreement Targets No. No. PABU No. No. No. No. Soum PLMU (Sheep/goats/TSF) PVU PFU PFLU PCPU B T B T B T B T B T B T Baruunbayab-Ulaan 0 1 0 1 1 1 0 1 0 1 0 1 Guchun-Us 0 1 0 1 1 1 0 1 0 1 0 1 Khairkhandulaan 0 1 0 1 2 2 0 1 0 1 0 1 Nariinteel 0 1 0 1 2 2 0 1 0 1 0 1 Taragt 0 1 0 1 6 6 0 1 0 1 0 1 Total 0 5 0 5 12 12 0 5 0 5 0 5 PLMU = Private Livestock Marketing Unit: PABU = Private Animal Breeding Units; TSF = Terminal Sire Flock; PVU=Private Veterinary Units; PFU = Private Forage Units; PFLU = Private Feedlot Units; PCPU = Private Cashmere Processing Units; B = Baseline 2019; T = Targets at end of project period Source: TRTA Consultant

3. Subproject Activities

361. Sixty sub-agreements are expected to be implemented in Uvurkhangai subproject area (Table 78).

Table 78: Number and Type of Sub-Agreements in Uvurkhangai Aimag No. Sub-Agreement Type No. of Sub-agreements 1 Pasture User Group/Rangeland User Agreement Development 5 (1 per soum) 2 Pasture User Group/Rangeland User Agreement Implementation 30 (1 per bagh) 3 Private Veterinary Unit 5 (1 per soum) 4 Private Livestock Marketing Unit 5 (1 per soum) 5 Private Forage Unit and Private Feedlot Unit 5 (1 per soum) 6 Private Animal Breeding Unit 5 (1 per soum) 7 Private Cashmere Processing Unit 5 (1 per soum) Total 60 Source: Consultant’s estimates

4. Subproject Implementation Schedule

362. The implementation schedule is shown in Table 79.

Table 79: Uvurkhangai Subproject Implementation Schedule Activities 2021 2022 2023 2024 2025 2026 2027 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 PMU operational Consulting Firm Operational Appoint Soum Steering Committee Appoint Soum Technical Team Aimag subproject workshops Soum Information campaign PUG/RUA Development Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Implement Activities PUG/RUA Implementation Develop Proposal Approve Sub-Agreement Contract Services 107

Activities 2021 2022 2023 2024 2025 2026 2027 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 Procure Eqpt. Supplies Construct Civil Works Implement Activities PVUs Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PLMU Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PFU and PLFU Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities Nucleus & Terminal Sire Flocks Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PCPU Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities Source: TRTA Consultant

5. Subproject Benefits

363. Subproject benefits arise from (i) increased livestock output, and (ii) reduced greenhouse gas emissions and increased carbon sequestration due to natural resource recovery. Increased carcass weight and fiber weight is estimated in Table 83.

Table 80: Livestock Outputs Without- and With-Project in Uverkhangai Subproject Area Year Livestock Turnoff (head) Meat Production (tons) Fiber Production (tons) Sheep Goats Cattle Sheep Goats Cattle Wool Cashmere Without Project 100,862 108,517 4,998 1,804 1,523 555 229 94 With Project 2021 100,862 108,517 4,998 1,804 1,523 555 229 94 2022 100,862 108,517 4,998 1,804 1,523 555 229 94 2023 100,862 108,517 4,998 1,804 1,523 555 229 94 2024 115,861 125,092 6,082 2,120 1,796 692 234 93

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Year Livestock Turnoff (head) Meat Production (tons) Fiber Production (tons) Sheep Goats Cattle Sheep Goats Cattle Wool Cashmere 2025 115,292 124,481 6,060 2,146 1,818 700 239 92 2026 114,288 123,326 6,018 2,176 1,843 712 243 91 2027 113,284 122,170 5,975 2,194 1,857 719 248 90 2028 111,878 120,504 5,912 2,216 1,874 729 251 89 2029 110,472 118,838 5,849 2,226 1,881 733 255 88 2030 108,696 116,861 5,757 2,239 1,891 739 258 86 2031 106,920 114,883 5,665 2,240 1,891 739 261 85 2032 104,805 112,494 5,566 2,245 1,894 744 264 83 2033 102,689 110,104 5,466 2,237 1,886 742 266 82 2034 100,263 107,405 5,339 2,233 1,882 743 267 80 2035 97,837 104,706 5,212 2,215 1,866 738 268 79 Source: TRTA Consultant

364. A major benefit of the project will be the protection of the natural resources for future generations, which is expressed as reduction in greenhouse gas emissions and increased carbon sequestration. It is expected that degradation levels will increase by one level in the without- project scenario, and decrease by one level in the with-project scenario (Table 81).

Table 81: Pasture Degradation in Uverkhangai Subproject Area Degradation Level (1-5) Soum Baseline Without Project With Project (2019) (2026) (2026) Baruunbayab-Ulaan 1 2 1 Guchun-Us 1 2 1 Khairkhandulaan 2 3 1 Nariinteel 2 3 1 Taragt 3 4 2 Average 1.8 2.8 1.2 Source: TRTA Consultant

6. Subproject Cost

365. The Uvurkhangai subproject cost is estimated as $4,314,592. Base costs for each sub- agreement are shown in Table 82 and detailed costs are set out in Table 83.

Table 82: Costs of Sub-agreements Unit Value Units Value Sub-Agreement Unit ($) (no.) ($) PUG RUA Development soum 10,000 5 50,000 PUG RUA Implementation a bagh 87,348 30 2,620,425 PVU soum 43,738 5 218,692 PLMU soum 80,115 5 400,575 PFU and PFLU and herder feeding soum 158,605 5 793,025 PABU soum 35,375 5 176,875 PCPU soum 11,000 5 55,000 Total 4,314,592 a Excludes in-kind beneficiary contributions PUG = pasture user group, RUA = rangeland user agreement, PVU = private veterinary unit, PLMU = private livestock marketing unit, PFU = private feeds unit, PFLU = private feedlot unit, PABU = private animal breeding unit, PCPU = private cashmere processing unit Source: Consultant’s estimates

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Table 83: Detailed Costs by Year for Uvurkhangai Subproject Unit Cost by Year ($) Cost Total Sub-Agreement/Item Unit ($) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ($) PUG RUA Development - 25,000 12,500 12,500 - - 50,000 Information Materials herder 5 - 25,000 12,500 12,500 - - 50,000 PUG RUA Implementation a - 918,430 899,298 655,106 584,975 - 2,620,425 Basic Eartags (PUG) unit 1 - 7,500 15,000 7,500 - - 30,000 Basic Eartags Applicators (PUG) unit 50 - 1,125 2,250 1,125 - - 4,500 Record book set (PUG) unit 500 - 1,250 2,500 1,250 - - 5,000 Weighing Scales (PUG) unit 1,000 - 2,500 5,000 2,500 - - 10,000 Small hanging digital Scales (PUG) unit 15 - 13,125 26,250 13,125 - - 52,500 Cameras for Land Manager (Env set 5,000 - 6,250 6,250 6,250 6,250 - 25,000 Monitoring) Herder technical info and record books unit 12 - 10,500 10,500 10,500 10,500 - 42,000 Deep well rehabilitation wells 2,500 - 15,625 15,625 15,625 15,625 - 62,500 Winter Camp upgrade house 140 - 122,500 122,500 122,500 122,500 - 490,000 Hay fields materials herder 200 - 175,000 175,000 175,000 175,000 - 700,000 Technical Support Group office upgrade unit 10,000 - 12,500 12,500 12,500 12,500 - 50,000 Soum PUG office unit 10,000 - 12,500 12,500 12,500 12,500 - 50,000 Water/ wells unit 9,500 - 190,000 190,000 190,000 190,000 - 760,000 Geophysical Surveys well 505 - 10,100 10,100 10,100 10,100 - 40,400 Land Manager computers IT set 2,000 - 5,000 2,500 2,500 - - 10,000 Information Materials soum 4.00 - 20,000 10,000 10,000 - - 40,000 Soum Reserve area deep wells herder 10,000 - 25,000 12,500 12,500 - - 50,000 Geophysical Surveys well 505 - 1,263 631 631 - - 2,525 Soum Reserve area animal shelters shelters 2,500 - 37,500 18,750 18,750 - - 75,000 Soum Reserve area signboards unit 100 - 500 250 250 - - 1,000 Environmental Baseline Assessments ls 30,000 - 30,000 30,000 30,000 30,000 - 120,000 PVU 19,010 - 109,346 109,346 - - - 218,692 SAU computers IT set 2,000 - 5,000 5,000 - - - 10,000 SVU computers IT set 2,000 - 5,000 5,000 - - - 10,000 PVU marketing materials herder 2 - 4,346 4,346 - - - 8,692 PVU equipment and supplies unit 5,000 - 33,750 33,750 - - - 67,500 Animal Health Books herder 5 - 9,375 9,375 - - - 18,750 Technical booklet herder 3 - 5,625 5,625 - - - 11,250 PVU upgrade unit 5,000 - 33,750 33,750 - - - 67,500 Soum vaccine storage unit 5,000 - 12,500 12,500 - - - 25,000 PLMU - 102,644 102,644 97,663 97,625 - 400,575 Basic Eartags (PLMU) unit 1 - 12,500 12,500 12,500 12,500 - 50,000 Basic Eartags Applicators (PLMU) unit 50 - 1,250 1,250 1,250 1,250 - 5,000 Record book set (PLMU) unit 100 - 750 750 750 750 - 3,000 PLMU technical info manual unit 15 - 19 19 38 - - 75 Weighing Scales (PLMU) unit 900 - 4,500 4,500 4,500 4,500 - 18,000 Marketing materials (PLMU) unit 5 - 3,125 3,125 3,125 3,125 - 12,500 PLMU computers IT unit 2,000 - 5,000 5,000 - - - 10,000 Livestock Marketing Facility unit 20,000 - 25,000 25,000 25,000 25,000 - 100,000 PLMU Fodder Storage Facility unit 20,000 - 25,000 25,000 25,000 25,000 - 100,000 PLMU office unit 10,000 - 12,500 12,500 12,500 12,500 - 50,000 PLMU : Geophysical survey well 400 - 500 500 500 500 - 2,000 Deep wells unit 10,000 - 12,500 12,500 12,500 12,500 - 50,000 PABU - 46,969 46,969 41,469 41,469 - 176,875 PABU Basic Eartags unit 1 - 6,250 6,250 6,250 6,250 - 25,000 PABU Basic Eartags Applicators unit 50 - 125 125 125 125 - 500 PABU Weighing Scales unit 1,000 - 1,250 1,250 1,250 1,250 - 5,000 PABU Marketing materials set 200 - 250 250 250 250 - 1,000

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Unit Cost by Year ($) Cost Total Sub-Agreement/Item Unit ($) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ($) PABU Small hanging digital Scales unit 15 - 188 188 188 188 - 750 SAU eqpt unit 1,000 - 1,250 1,250 1,250 1,250 - 5,000 Male Flock Basic Eartags unit 1 - 4,250 4,250 4,250 4,250 - 17,000 Male Flock Basic Eartags Applicators unit 50 - 1,125 1,125 1,125 1,125 - 4,500 Male Flock Weighing Scales unit 1,000 - 1,250 1,250 1,250 1,250 - 5,000 Male flock Technical manuals unit 10 - 250 250 - - - 500 PABU Technical manuals set 10 - 375 375 375 375 - 1,500 Basic Eartags (Term Sire Flock) unit 1 - 625 625 625 625 - 2,500 Basic Eartags Applicators (Term Sire unit 50 - 125 125 125 125 - 500 Flock) Record book set (TSF) unit 500 - 1,250 1,250 1,250 1,250 - 5,000 Weighing Scales (Term Sire Flock) unit 900 - 1,125 1,125 1,125 1,125 - 4,500 TSF Technical manuals unit 10 - 250 250 - - - 500 PABU signboard unit 125 - 156 156 156 156 - 625 PABU computers IT set 2,000 - 5,000 5,000 - - - 10,000 PABU livestock housing upgrade unit 5,000 - 6,250 6,250 6,250 6,250 - 25,000 PABU building/ office unit 10,000 - 12,500 12,500 12,500 12,500 - 50,000 Housing upgrade for TSF flock (Term unit 2,000 - 2,500 2,500 2,500 2,500 - 10,000 Sire Flock) Housing upgrade for Male Flock flock 500 - 625 625 625 625 - 2,500 PFU and PFLU - 198,256 396,513 198,256 - - 793,025 PLFU Basic Eartags unit 1 - 3,750 7,500 3,750 - - 15,000 PLFU Basic Eartags Applicators unit 50 - 625 1,250 625 - - 2,500 PLFU Record book set unit 500 - 1,250 2,500 1,250 - - 5,000 PLFU Weighing Scales unit 1,000 - 2,500 5,000 2,500 - - 10,000 PLFU Marketing materials unit 200 - 250 500 250 - - 1,000 PFU Fodder plot (fence, well) unit 10,000 - 12,500 25,000 12,500 - - 50,000 PFU Tractor unit 20,000 - 25,000 50,000 25,000 - - 100,000 PFU Tractor Equipment unit 5,000 - 6,250 12,500 6,250 - - 25,000 PFU Feed processing equipment unit 2,000 - 2,500 5,000 2,500 - - 10,000 PFU Hay making equipment unit 5,000 - 6,250 12,500 6,250 - - 25,000 PFU Truck unit 10,000 - 12,500 25,000 12,500 - - 50,000 PFU Sprinkler irrigation unit 5,000 - 6,250 12,500 6,250 - - 25,000 PFU Water tank unit 1,000 - 1,250 2,500 1,250 - - 5,000 PFU Fodder plot establishment unit 5,000 - 6,250 12,500 6,250 - - 25,000 PFU Fodder Storage Facility unit 20,000 - 25,000 50,000 25,000 - - 100,000 PFU & PFLU deep well unit 10,000 - 12,500 25,000 12,500 - - 50,000 Geophysical Surveys well 505 - 631 1,263 631 - - 2,525 PFU office unit 5,000 - 6,250 12,500 6,250 - - 25,000 PFLU Livestock Feedlot unit 23,400 - 29,250 58,500 29,250 - - 117,000 PFLU Fodder Storage Facility unit 25,000 - 31,250 62,500 31,250 - - 125,000 PFLU office unit 5,000 - 6,250 12,500 6,250 - - 25,000 PCPU - 13,750 15,000 26,250 - - 55,000 PCPU: Bags and labels unit 1,000 - 1,250 2,500 1,250 - - 5,000 PCPU: PCPU sorting facility unit 10,000 - 12,500 12,500 25,000 - - 50,000 Total Base Cost - 2,610,097 2,945,847 2,062,488 1,448,138 - 4,314,592 a Excludes in-kind beneficiary contributions PUG = pasture user group, RUA = rangeland user agreement, PVU = private veterinary unit, PLMU = private livestock marketing unit, PFU = private feeds unit, PFLU = private feedlot unit, PABU = private animal breeding unit, PCPU = private cashmere processing unit Source: Consultant’s estimates

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D. Bayankhongor Aimag Subproject

1. Current Situation

a. Subproject Overview

366. Bayankhongor Aimag has an area of 115,978 km2 and borders with Gobi-Altai, Zavkhan, Arkhangai, Uvurkhangai and Umnugovi Aimags. The highest mountains in the aimag are Altain Nuruu and Ikh Bogd. The main river flowing through the aimag is the Tuin, the main lake is the Buutsagaan Nuur the spars include Shargaljuut, Khuremt, Khaliut and Urguut (Figure 27).

Figure 27: Project Area in Bayankhongor Aimag

Source: TRTA Consultant

367. Population. Bayankhongor Aimag has a population of 89,253 persons in 26,617 households of which 12,011 are herder households. There are 20 soums in the aimag of which five—Bayan-Ovoo, Erdenetsogt, Ulziit, Jinst and Bogd—are in the subproject area.

368. Bayanovoo Soum. Bayanovoo Soum is located 26 km from Bayankhongor aimag center and 626 km from Ulaanbaatar City. The soum borders Jinst, Baatsagaan, Bumbugur, Galuut, Erdenetsogt and Bayankhongor soums. Sixty percent of the soum is in the khangai region and 40% is the steppe. The main soils are mountain brown and steppe brown soils. The area of the soum is 3,225 km2, of which 321,715 ha is pastureland, 32 ha forest and a small area of arable cropland. There are 39 rivers and springs, and 194 lakes and ponds in the soum. The soum has a continental climate with an average annual precipitation is 185.6 mm. The vegetation is mountain steppe small bunch grass-forb-grass rangeland. The average annual pasture yield of the soum is 24 kg/ha. Carrying capacity of the pasture is 186,700 live sheep units, which was exceeded by 92% in 2019. About 29.7% of the pasture has been degraded to various extents. The ratio of sheep to goats is 1.13:1. In 2019, the soum prepared 65 tons of forage, of which 35

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tons was hay, 25 tons feed grain, and 5 tons hand-made fodder, equivalent to 0.2 kg of grass per live sheep unit, which is not sufficient for feeding soum livestock during harsh periods.

369. Erdenetsogt Soum. Erdenetsogt Soum is located 29 km from Bayankhongor aimag center and 689 km from Ulaanbaatar City. The soum borders Bulgan and Tsenkher soums of Arkhangai Aimag; Uyanga Soum of Uvurkhangai Aimag; and Ulziit, Bayan-Ovoo, Galuut and Bayankhongor in Bayankhongor Aimag. The soum is located entirely in the khangai region. There are dark brown soils in the mountains, and meadow permafrost and mountain meadow steppe soils. The area of the soum is 4,100 km2, of which 274,433 ha is pastureland, 3,370 ha forest and 54 ha arable cropland. There is 130,966 ha of special protected areas in the soum. There are 315 rivers and springs, and 80 lakes and ponds. The average annual precipitation is 223-380 mm. Vegetation includes kobrisia, festuca, small bunch grass-forb rangeland. The average annual pasture yield of the soum is 29 kg/ha. The carrying capacity of the pastureland is 192,300 live sheep units and was exceeded by 205% in 2019. About 59.9 % of the pastureland has been degraded to various extents. The ratio of sheep to goats is 1.14:1. In 2019, the soum prepared 2,880 tons of hay equivalent to 4 kg of grass per live sheep unit, which is sufficient for feeding soum livestock for 10 days during harsh periods.

370. Ulziit Soum. Ulziit Soum is located 18 km from Bayankhongor aimag center and 603 km from Ulaanbaatar City. The soum borders Jinst, Bayan-Ovoo, Erdenetsogt, and Bayankhongor soums. Seventy percent of the soum is in the 70% khangai region and 30% in the steppe region. Dominant soils are mountain brown, valley light brown and steppe brown. The area of the soum is 5,313 km2, of which 382,357 ha is pastureland, 242 ha forest, 313 ha arable cropland and 9 ha abandoned cropland. There are 39 rivers and springs, and 194 lakes and ponds in the soum. The average annual precipitation is 200 mm. Vegetation includes kobrisia, festuca, and small bunch grass-forb rangeland. The average annual pasture yield of the soum is 41 kg/ha. The carrying capacity of the pastureland is 385,800 live sheep units, which was exceeded by 11% in 2019. About 27.9 % of the pastureland has been degraded to various extents. The ratio of sheep to goats is 0.65:1. In 2019, the soum prepared 519 tons of forage, of which 403 tons was hay, 94.9 tons was feed grain and 21.3 tons was handmade feeds, equivalent to 1.3 kg of grass per live sheep unit, which is not sufficient to feed soum livestock during harsh periods.

371. Jinst Soum. Jinst Soum is located 90 km from Bayankhongor aimag center and 681 km from Ulaanbaatar City. The soum borders Ulziit, Bogd, and Baatsagaan soums in its aimag, and Baruunbayanulaan and Guchin-Us soums of Uvurkhangai Aimag. The soum is in the govi region. Predominant soils are mountain brown, valley light brown and steppe brown. The area of the soum is 5,313 km2, of which 522,640 ha is pastureland, 76 ha arable cropland and 21,289 ha special protected areas. There are 42 rivers and springs, and 7,000 lakes and ponds in the soum, most of which are seasonal. The average annual precipitation is 100 mm. Dominant vegetation is govi grassland, some shrubs and shrub pastures. The average annual pasture yield of the soum is 17 kg/ha. The carrying capacity of the pastureland is 207,600 live sheep units, which was exceeded by 21% in 2019. The pastureland has been degraded to various extents. The ratio of sheep to goats is 0.33:1. In 2019, the soum prepared 178.5 tons of forage, of which 159.5 tons was hay, 4.5 tons feed grain, and 15 tons handmade feeds, equivalent to 0.8 kg of grass per live sheep unit, which is not sufficient for feeding the soum livestock during harsh periods.

372. Bogd Soum. Bogd Soum is located 129 km from Bayankhongor aimag center and 651 km from Ulaanbaatar City. The soum borders Bayangovi, Jinst, Baatsagaan soums in its aimag, and Baruunbayan Soum of Uvurkhangai Aimags. The soum is in the govi region and predominant soil types are govi brown, mountain brown and light brown soils. The area of the soum is 3,847 km2, of which 383,352 ha is pastureland, 7 ha forest, 72 ha arable cropland, 333 ha abandoned 113

cropland, and 79,164 ha special protected areas. There are 37 rivers and springs, and 6 lakes and ponds in the soum, most of which are seasonal. The average annual precipitation is 100-150 mm. The main vegetation is stipa-semi-shrub desert rangeland. The average annual pasture yield of the soum is 16 kg/ha. The carrying capacity of the pastureland is 145,400 live sheep units, which was exceeded by 104% in 2019. The pastureland has been degraded to various extents. The ratio of sheep to goats is 0.25:1. In 2019, the soum prepared 1,699 tons of forage, of which 1,093 tons was hay, 591 tons feed grain, and 15 tons handmade feeds, which is enough to feed soum livestock for 10 days during harsh periods.

b. Natural Resources

373. The Bayankhongor subproject area comprises 20,338 km2 (18% of the aimag territory), of which 1,884,498 ha is pastureland, 3,652 forest land and 8,108 ha water bodies (Table 84).

Table 84: Land Classes in Bayankhongor Subproject Area Soum Territory Pasture Forest Water bodies Cropland (ha) (ha) (ha) (ha) (ha) Bayan-Ovoo 322,498 321,715 32 233 26 Erdenetsogt 410,023 274,433 3,370 401 54 Ulziit 531,264 382,357 242 223 313 Jinst 531,264 522,640 - 7,208 76 Bogd 384,743 383,352 7 43 72 Subproject total 2,033,811 1,884,498 3,652 8,108 540 % of aimag area 18 21 0 16 20 Aimag total 11,597,780 8,859,767 3,609,890 51,118 2,674 Source: Project Aimag Food and Agriculture Departments and the target soum governments

374. Land degradation conditions in the subproject soums in Bayankhongor Aimag varies from level I to level III. Level I shows no degradation, meaning all dominants are in place. Level III shows moderate degradation, meaning dominants are in decline and being replaced by subdominants: the number of species is declining. The land recovery category of the subproject soums varies from class I to class IV. Class I indicates that the plant community is at or near reference conditions (non-degraded) or requires 1-3 growing seasons for recovery from minor changes (slightly degraded). Stocking rate should be matched to forage supply with temporary seasonal deferment as needed. Class IV indicates that the plant community is altered due to the local loss of key plant species, invasion of noxious plant species, or alteration of hydrology, which is unlikely to be recovered for over a decade to many decades without intensive interventions such as species removal, seeding, or manipulations to recover historical hydrological function.

375. Pasture degradation is a problematic issue in the subproject area. The degradation level is already between I and III in the subproject soums of Bayankhongor Aimag, which indicates says that the pasture conditions of Bayankhongor subproject area could be recovered into their initial conditions in 1-10 or more years after taking organized appropriate actions. This is a key concern for the livestock sector in view of climate change induced frequency increase of severe weather events.

c. Livestock Management

376. The subproject area has a population of 16,049 persons (18% of the aimag population) in 4,836 households of which 3,637 are herder households (Table 85). Poverty incidence averages 34.1% in the Bayankhongor subproject area and ranges between 23.6% in Jinst and 39.8% in

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Erdenetsogt.

Table 85: Population and Households in Bayankhongor Subproject Area Population Households Herder households Herders Poverty Soum (no.) (no.) (no.) (no.) (%) Bayan-Ovoo 2,594 853 456 797 30.8 Bogd 3,117 901 662 1,709 39.8 Erdenetsogt 4,296 1,300 1087 1,668 38.5 Jinst 2,197 635 553 930 23.6 Ulziit 3,845 1,147 879 1,195 33 Total 16,049 4,836 3,637 6,299 34.1% Source: Project Aimag Food and Agriculture Departments and the target soum governments and Ministry of Labour and Social Protection 2020 for poverty

377. Herder groups. There are 2 herder groups in the subproject area, comprising of 58 members who uses 31% of the pasture area (Table 86).

Table 86: Herder Groups in Bayankhongor Subproject Area Indicator Unit Bogd Jinst Ulziit Bayanovoo Erdenetsogt Overall Total households no. 861 642 1,107 813 1,323 4,746 Herder households no. 662 473 865 456 992 3,448 Herder groups no. 1 1 0 0 0 2 Members no. 9 12 7 7 23 58 Coverage of herder groups % 100 60 14 15 30 44 Pasture used by herder % 37 67 15 9 29 31 groups Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

378. Pasture User Groups. There are 26 pasture use groups in the subproject area with 946 members (Table 87). Twelve of the groups are in Jinst Soum with a total of 284 members and the remaining 14 are in Bogd Soum with 662 members. On average, 26% of the herder households in the subproject area are members of the pasture user groups. There are two Soum Pasture Associations (SPA) in the subproject area, one in each of Jinst and Bogd soums.

Table 87: Pasture User Groups and Soum Pasture Associations in Bayankhongor Subproject Area Pasture User Groups Membership of Soum Pasture Herder Soum Pasture User Number Members Associations households Groups Bayan-Ovoo - - - 456 0% Erdenetsogt - - - 1,087 0% Ulziit - - - 879 0% Jinst 12 284 1 553 51% Bogd 14 662 1 662 100% Total 26 946 2 3,637 26% Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

379. Cooperatives. There are 41 cooperatives in the subproject area with a total of 2,397 members (Table 88). On average, 39% of herder households are members to the cooperatives. Of these 41 cooperatives, 23 are herder cooperatives with eight in Bayan-Ovoo, ten in Ulziit, one in Jinst and four in Bogd soums. The herder cooperatives have 1,404 members, and average of 61 members per cooperative. Cooperatives do not undertake any pasture protection activities, but herders mainly joined to benefit from the government wool premiums through the 115

cooperatives, so it more suitable to cooperate with them linking herders with processing factories.

Table 88: Cooperatives in Bayankhongor Subproject Area Cooperatives Herder cooperatives Herder Enrollment in Soum Number Members Number Members households cooperatives Bayan-Ovoo 13 227 8 132 456 29% Erdenetsogt 5 313 - - 1,087 0% Ulziit 14 340 10 304 879 35% Jinst 4 590 1 50 553 9% Bogd 5 927 4 918 662 139% Total 41 2,397 23 1,404 3,637 39% Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

380. There are three forest user groups in the subproject area, located in areas where there are project forest resources, particularly in Bayanovoo, Jinst, and Bogd soums (Table 89). The three groups have 48 members and their purpose is to protect the forest resources not the pasture.

Table 89: Forest User Groups in Bayankhongor Subproject Area Forest User Groups Herder Enrollment in Forest Soum Number Members households User Groups Bayan-Ovoo 1 18 456 4% Jinst 1 10 553 2% Bogd 1 20 662 3% Total 3 48 3,637 1% Source: Aimag Food and Agriculture Department and soum governments, Feb-May 2020

d. Pasture Infrastructure

381. There are 153 engineering designed deep wells in the pasturelands, 266 springs, 25 lakes and ponds and 68 rivers in the subproject area, and there is indicated to be a need for an additional 78 deep wells (Table 90). These additional deep wells are required to ensure sufficient drinking water for livestock numbers within the carrying capacity and to relieve grazing pressure on pastures near existing wells. Pasture degradation will be reduced because currently underused pasture will be developed thus expanding the pasture area for livestock. Water supply for pasturelands is in serious disrepair and urgently needs to be improved, not only as drinking water for livestock but also to reverse pasture degradations. Traditionally, individual water points are constructed for livestock watering including both high yielding engineering (deep) wells and shallow/hand-made wells. Due to a lack of maintenance the engineering type wells in particular have degraded since the transition period and the number of operational wells has sharply declined. This has forced herders to move their stock to areas around the operational wells and close to rivers. The carrying capacity of the pastures in these areas is far exceeded, causing serious land degradation.

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Table 90: Water Points in Bayankhongor Subproject Area Lakes and Additional Soum Deep wells Springs Rivers ponds wells required Bayan-Ovoo 42 39 3 3 18 Erdenetsogt 7 66 14 59 12 Ulziit 34 33 1 4 20 Jinst 34 64 3 1 16 Bogd 36 64 4 1 12 Total 153 266 25 68 78 Source: Aimag Food and Agriculture Department and soum governments

382. There are 2,129 livestock open enclosures without roof, 1,587 livestock semi-roofed enclosures, 472 livestock sheds, 2,222 camp with certificates of use, and 21 fodder storages in the subproject area (Table 91). Achievement of sustainable pasture management through reduction of livestock numbers and rehabilitation of degraded pasture requires both pasture improvement and improved livestock enclosures and sheds, and fodder storage.

Table 91: Animal Shelters and Storages in Bayankhongor Subproject Area Open Semi-roofed Animal Camps with Fodder Soum enclosure enclosure shed certificate storage Bayan-Ovoo 200 109 - 228 2 Erdenetsogt 307 154 - 351 4 Ulziit 547 554 2 735 2 Jinst 450 250 70 270 8 Bogd 625 520 400 638 5 Total 2,129 1,587 472 2,222 21 Source: Aimag Food and Agriculture Department and soum governments

e. Livestock Numbers, Breeds and Output

383. Between 1990 and 2019 the livestock number in the subproject area increased by 202%, of which in Bayan-Ovoo Soum increased by 261%, Erdenetsogt Soum by 154%, Ulziit Soum by 254%, Jinst Soum by 159% and Bogd Soum by 187% (Table 92 and Figure 28).

Table 92:Total Livestock Number in Bayankhongor Subproject Area for Selected Years Year Increase between Soum 1990 2000 2010 2019 1990 and 2019 Bayan-Ovoo 75.4 90.5 98. 272.5 261% Erdenetsogt 83.1 67.2 102.3 211.3 154% Ulziit 78.3 135.2 157.5 277.5 254% Jinst 80.2 125.2 86.6 207.6 159% Bogd 77.9 144.2 122.9 223.7 187% Bayankhongor subproject area 394.9 562.2 567.4 1,192.7 202% Source: National Statistics Office of Mongolia

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Figure 28: Livestock Number Trend in Bayankhongor Subproject Area

1,400,000

1,200,000

1,000,000

Bogd 800,000 Jinst 600,000 Ulziit

Livestock Livestock numbers 400,000 Erdenetsogt Bayanovoo 200,000

- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Years of 1990-2019

Source: National Statistics Office of Mongolia

384. There were 1.19 million livestock in the Bayankhongor subproject area in 2019, equivalent to 1.92 million live sheep units. Details by type of livestock and by soum are in Table 93. Overall, the ratio of sheep to goats was 0.65:1 with individual soums varying between 0.25:1 in Bogd and 1.14:1 in Erdenetsogt. This indicates that the number of goats has become unsustainably high in Ulziit, Jinst and Bogt soums.

Table 93: Livestock Numbers by Soum in 2019 Soum Horses Cattle Camels Sheep Goats Total Live Sheep Ratio Units sheep:goats Bayan-Ovoo 9,378 7,973 456 134,998 119,690 272,495 358,483 1.13:1 Erdenetsogt 14,210 59,336 9 73,385 64,406 211.346 586,881 1.14:1 Ulziit 14,252 15,399 351 97,169 150,287 277,458 426,340 0.65:1 Jinst 6,189 2,175 2,674 48,953 147,628 207,619 251,561 0.33:1 Bogd 6,046 6,122 5,708 41,384 164,479 223,739 297,009 0.25:1 Total 50,075 91,005 9198 395,889 646,490 1,192,657 1,920,274 0.61:1 Source: National Statistics Office of Mongolia

385. Each of the soums has a history of dzuds. The severe dzud in Bayan-Ovoo Soum lasted from 1998 to 2005 and 32,000 and 46,000 head of livestock were lost, about 60% of their livestock at the beginning of the dzud. In Erdenetsogt Soum, after the dzud in 2007, 225,277 livestock survived but in the subsequent years the number increased by 66%. Ulziit Soum lost 52-58% of its livestock in the dzud of 2000-2003 and 2015-16 due to malnutrition. In Jinst Soum, dzuds occurred in 1996-97, 2000-2003, and 2016-17. In 2000-2003, 83% of livestock were lost due to malnutrition. In Bogd Soum, due to the dzud in 2000-2002, 70.6% of the livestock were lost due to malnutrition.

386. In addition to the predominance of local livestock breeds, there are various other breeds of livestock in most soums. In Bayan-Ovoo Soum there are Jargalant and Bayad breeds (27,000 head), Zalaa Jinst white and the Bumbugur Ulaan goats (29,923 head). In Erdenetsogt Soum there are Uzemchin, Sartuul and Bayad sheep (15,340 heads), Erchmiin Khar goats (3,503 heads), Darkhad and Galshar horses (1,441 heads). There are 41 Alatau cattle in Ulziit Soum,

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while in Jinst Soum there are Bumbugur Ulaan goats (21,350 head), Idren Tsagaan goats (34,500 head), and Lama Gegeen Ulaan camels (1,800). In Bogd Soum there 40,000 goats of the Idren Zalaa breed and 5,708 camels of the Lama Gegeen Ulaan breed.

387. Output. Bayankhongor subproject area sells an average of 120,000 head of livestock per year, of which one herder household sells an average of 40 head. Herder households supply 2.7 tons of meat to the market annually, and the soums can produce a total of 2,900 tons of meat. The project area produces an average of 240 tons of cashmere per year.

f. Inputs and Services

388. There are 10 private veterinary units (PVUs) in the subproject area (Table 94). Legally, PVUs must provide general or specialized professional care and services in the field of prevention, diagnosis, treatment of all or certain types of animal diseases, combating infectious diseases, ensuring safety of animal originated raw materials.21 They must be a legal entity with a veterinarian accredited to provide professional services, premises and equipment that meet the standard requirements. these PVUs provide services to 24 baghs in the subproject area with lower capacity than required in terms of equipment and premises.

Table 94: Private Veterinary Service Units in Bayankhongor Subproject Area Soum No. Names Remarks SHMDZ, Khishig Taijiin Ovoo: Sprayer, syringe, Bayan-Ovoo 3 Khishig Taijiin Ovoo, sample tank, microscope, meat milk test, Duvuntiin numur surgical tools, cooler Munkhkhan buyant sureg, Erdenetsogt 2 Tsagaan sarlagiin khishig Denzo LLC, Ulziit 2 Denzo: Vehicle, surgery and obstetrics Tuin delgereh cooperative Veterinary equipment, vehicles, workplaces Jinst 1 Dundarshgui bayalag and pharmacies Enene orgil, Bogd 3 Tushal ovoo, Moto pump, automax Bogd Erdene orgil Total 11 Source: Aimag Food and Agriculture Department and soum governments

389. There are 15 trading entities and 6 citizens trading livestock products in subproject area (Table 95).

Table 95: Traders of Livestock Products in Bayankhongor Subproject Area Soum Traders of meat, by-products, wool and Individuals and legal entities for cashmere primary processing Bayan-Ovoo Khankharin Nuruu, Asgamba 7 Khairkhani Uguj, Guchingiin Undraga Ekh, Khövshikh Khairkhan, Bayan Darkhai Tag, and Urtyn Golyn Olon Ovoot coops, Janjin Tolgoi Erdenetsogt milk processing: 2 2

21 The PVUs can also provide the special specialized veterinary care and services in mobile and localized means. 119

Soum Traders of meat, by-products, wool and Individuals and legal entities for cashmere primary processing Ulziit Olonkhos, Nayan Bulag Tal, and 3 milk processing: 2, Hide & 3 Tsetslekh Khurd Coops skin: Mongol Ukhaan Ulziit Jinst Ikh Artsat Khorshoo, and Tüin Khishig 2 coops Bogd Ariun Bogdyn Khishig, Undrakh Bayan 3 milk processing: 1 1 Bogd, and Orog Nuuryn Khishig coops Total 15 6 Source: TRTA Consultant, Feb-May 2020

g. Downstream Supply Chain

390. There are no abattoirs, meat processing factories, workshops, livestock feeding units, or fodder production businesses in the subproject area. There are five dairy processing units in the subproject area, two in Erdenetsogt, two inUlziit and one in Bogd soums.

391. The major marketing problems in Bayankhongor subproject area include: (i) lack of a local sale point; (ii) no regular market point; (iii) lack of experience of herders in selling livestock; and (iv) low prices paid by middleman. The main buyers differ depending on the location of the soums to the settlements, but typically Ulaanbaatar is also a marketplace. Live animals are transported in warm seasons and carcasses in cold seasons. The cost of transportation to Ulaanbaatar and other issues are summarized in Table 96.

Table 96: Major Problem and Buyers in Bayankhongor Subproject Area Soum Major problems Major buyers Transportation Bayanovoo No local sale point Sells to central markets of aimag Transports: different lorries. center. Close to the aimag center. Transport cost: 150,000MNT per In spring and summer, sells to local ton. market, and in other periods to any buyer. Erdenetsogt Low price of Sells to middleman of aimag center, Transports: ISUZU, Hino, Volvo middleman and Ulaanbaatar at the soum. Also Shalaanz. sells at the aimag venter market. Transport cost: 35,000 MNT per animal. Ulziit No regular market Sells at markets of aimag center, Transports: 9-ton lorry. point different middleman Transport cost: 500,000 MNT Jinst No regular market Sells to aimag and city middleman. Transports: different lorries. point Transport cost: 40,000 MNT per big, 8,000 MNT per small animals Bogd Middleman price, Sells mostly to local middleman in Transport cost: 100,000 MNT per herders have not cash or hay. ton organized for selling Source: TRTA Consultant, Apr 2020

h. Local Legislation

392. In support of national legislation, the soums have approved and follow local legislation (Table 97).

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Table 97: Local Legislation in Bayankhongor Subproject Area Soums Document Approved Bayanovoo Soum pasture use procedure. Bagh citizen's khural resolutions on pasture release, recovery and protection

Erdenetsogt Soum pasture use procedure. Bagh citizen's khural resolutions on pasture release, recovery and protection Ulziit Soum land management plan Citizens' Representative Meeting, Resolution Jinst Soum working group Soum governor resolution, 2018.01.29 Bagh citizen's khural resolutions on pasture release, recovery and protection Bogd Procedure on responsible pasture: Chapter 10 Article Citizens' Representative 135. To adjust pasture use to pasture resource Meeting, Resolution No.10, capacity, create economic incentives for accountability, 2019.11.27, Registered with the increase the number of livestock meet with pasture Ministry of Justice in the carrying capacity, ensure the sustainability of livestock Administrative Norms Act No. production, and improve pastureland ecological 4597 capacity at the soum and bagh level. Source: TRTA Consultant, Feb-May 2020

2. Subproject Targets

393. The Bayankhongor Aimag subproject will have annual and end-of-project targets that relate to each of the soum sub-agreements. The end-of-project targets related to grazing management are shown in Table 98. These will be updated during implementation and annual targets will also be developed during the aimag subproject planning meetings as per the aimag subproject template.

Table 98: Bayankhongor: Targets Related to Grazing Management Sub-agreements Livestock Sheep Units (000s) No. Pasture User Groups Degradation Level (1-5) a Soum Baseline Target Baseline Target Baseline Target 2019 2027 2019 2027 2019 2027 Without Project Bayan-Ovoo 358.5 358.5 0 0 2 3 Bogd 297.0 297.0 14 14 1 2 Erdnetsogt 586.9 586.9 0 0 2 3 Jinst 251.6 251.6 12 12 1 2 Ulziit 426.3 426.3 0 0 3 4 Total 1,920.3 1,920.3 26 26 1.8 2.8 With Project Bayan-Ovoo 358.5 316.3 0 18 2 1 Bogd 297.0 262.1 14 26 1 1 Erdnetsogt 586.9 517.8 0 43 2 1 Jinst 251.6 222.0 12 22 1 1 Ulziit 426.3 376.2 0 35 3 2 Total 1,920.3 1,694.4 26 144 1.8 1.2 a Aimag degradation levels are the averages of the project soums. Source: Consultant’s estimates

394. The targets for second-generation sub-agreements (Table 99), assume that each soum will implement one of each.

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Table 99: Bayankhongor: Second-Generation Sub-agreement Targets

No. No. PABU No. No. No. PFU Soum PLMU (Sheep/goats/TSF) PFLU PCPU

B T B T B T B T B T Bayan-Ovoo 0 1 0 1 0 1 0 1 0 1 Bogd 0 1 0 1 0 1 0 1 0 1 Erdnetsogt 0 1 0 1 0 1 0 1 0 1 Jinst 0 1 0 1 0 1 0 1 0 1 Ulziit 0 1 0 1 0 1 0 1 0 1 Total 0 5 0 5 0 5 0 5 0 5 PLMU = Private Livestock Marketing Unit: PABU = Private Animal Breeding Units; TSF = Terminal Sire Flock; PVU=Private Veterinary Units; PFU = Private Forage Units; PFLU = Private Feedlot Units; PCPU = Private Cashmere Processing Units; B = Baseline 2019; T = Targets at end of project period Source: TRTA Consultant

3. Subproject Activities

395. Sixty sub-agreements are expected to be implemented in Bayankhongor subproject area (Table 100).

Table 100: Number and Type of Sub-Agreements in Bayankhongor Aimag No. Sub-Agreement Type No. of Sub-agreements 1 Pasture User Group/Rangeland User Agreement Development 5 (1 per soum) 2 Pasture User Group/Rangeland User Agreement Implementation 30 (1 per bagh) 3 Private Veterinary Unit 5 (1 per soum) 4 Private Livestock Marketing Unit 5 (1 per soum) 5 Private Forage Unit and Private Feedlot Unit 5 (1 per soum) 6 Private Animal Breeding Unit 5 (1 per soum) 7 Private Cashmere Processing Unit 5 (1 per soum) Total 60 Source: TRTA Consultant

4. Subproject Implementation Schedule

396. The implementation schedule is shown in Table 101.

Table 101:Bayankhongor Subproject Implementation Schedule Activities 2021 2022 2023 2024 2025 2026 2027 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 PMU operational Consulting Firm Operational Appoint Soum Steering Committee Appoint Soum Technical Team Aimag subproject workshops Soum Information campaign PUG/RUA Development Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Implement Activities PUG/RUA Implementation

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Activities 2021 2022 2023 2024 2025 2026 2027 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PVUs Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PLMU Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PFU and PLFU Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities Nucleus & Terminal Sire Flocks Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities PCPU Develop Proposal Approve Sub-Agreement Contract Services Procure Eqpt. Supplies Construct Civil Works Implement Activities Source: TRTA Consultant

5. Subproject Benefits

397. Subproject benefits arise from (i) increased livestock output, and (ii) reduced greenhouse gas emissions and increased carbon sequestration due to natural resource recovery. Increased carcass weight and fiber weight is estimated in Table 106.

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Table 102: Livestock Outputs Without- and With-Project in Bayankhongor Subproject Area Year Livestock Turnoff (no.) Meat Production (tons) Fiber Production (tons) Sheep Goats Cattle Sheep Goats Cattle Wool Cashmere Without Project 75,437 120,059 12,110 1,349 1,685 1,344 171 103 With Project 2021 75,437 120,059 12,110 1,349 1,685 1,344 171 103 2022 75,437 120,059 12,110 1,349 1,685 1,344 171 103 2023 75,437 120,059 12,110 1,349 1,685 1,344 171 103 2024 86,655 138,397 14,735 1,585 1,987 1,675 175 102 2025 86,229 137,721 14,683 1,605 2,012 1,697 179 101 2026 85,478 136,443 14,579 1,628 2,039 1,726 182 100 2027 84,727 135,164 14,476 1,641 2,054 1,742 185 99 2028 83,676 133,321 14,323 1,657 2,073 1,765 188 98 2029 82,624 131,478 14,170 1,665 2,081 1,775 191 97 2030 81,296 129,290 13,948 1,675 2,092 1,790 193 96 2031 79,967 127,102 13,726 1,676 2,092 1,791 196 94 2032 78,385 124,459 13,484 1,679 2,095 1,802 197 92 2033 76,803 121,815 13,243 1,673 2,086 1,799 199 91 2034 74,989 118,829 12,935 1,670 2,082 1,800 200 89 2035 73,174 115,842 12,627 1,657 2,064 1,787 201 87 Source: Consultant’s estimates

398. A major benefit of the project will be the protection of the natural resources for future generations, which is expressed as reduction in greenhouse gas emissions and increased carbon sequestration. It is expected that degradation levels will increase by one level in the without- project scenario, and decrease by one level in the with-project scenario (Table 103).

Table 103: Pasture Degradation in Bayankhongor Subproject Area Degradation Level (1-5) Soum Baseline Without Project With Project (2019) (2026) (2026) Bayan-Ovoo 2 3 1 Bogd 1 2 1 Erdnetsogt 2 3 1 Jinst 1 2 1 Ulziit 3 4 2 Average 1.8 2.8 1.2 Source: TRTA Consultant

6. Subproject Cost

399. The Bayankhongor subproject cost is estimated as $4,314,592. Base costs for each sub- agreement are shown in Table 104 and detailed costs are set out in Table 105.

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Table 104: Costs of Sub-agreements Unit Value Units Value Sub-Agreement Unit ($) (no.) ($) PUG RUA Development soum 10,000 5 50,000 PUG RUA Implementation a bag 87,348 30 2,620,425 PVU soum 43,738 5 218,692 PLMU soum 80,115 5 400,575 PFU and PFLU and herder feeding soum 158,605 5 793,025 PABU soum 35,375 5 176,875 PCPU soum 11,000 5 55,000 Total 4,314,592 a Excludes in-kind beneficiary contributions PUG = pasture user group, RUA = rangeland user agreement, PVU = private veterinary unit, PLMU = private livestock marketing unit, PFU = private feeds unit, PFLU = private feedlot unit, PABU = private animal breeding unit, PCPU = private cashmere processing unit Source: Consultant’s estimates

Table 105: Detailed Costs by Year for Bayankhongor Subproject Unit Cost by Year ($) Cost Total Sub-Agreement/Item Unit ($) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ($) PUG RUA Development - 25,000 12,500 12,500 - - 50,000 Information Materials herder 5 - 25,000 12,500 12,500 - - 50,000 PUG RUA Implementation a - 918,430 899,298 655,106 584,975 - 2,620,425 Basic Eartags (PUG) unit 1 - 7,500 15,000 7,500 - - 30,000 Basic Eartags Applicators (PUG) unit 50 - 1,125 2,250 1,125 - - 4,500 Record book set (PUG) unit 500 - 1,250 2,500 1,250 - - 5,000 Weighing Scales (PUG) unit 1,000 - 2,500 5,000 2,500 - - 10,000 Small hanging digital Scales (PUG) unit 15 - 13,125 26,250 13,125 - - 52,500 Cameras for Land Manager (Env set 5,000 - 6,250 6,250 6,250 6,250 - 25,000 Monitoring) Herder technical info and record books unit 12 - 10,500 10,500 10,500 10,500 - 42,000 Deep well rehabilitation wells 2,500 - 15,625 15,625 15,625 15,625 - 62,500 Winter Camp upgrade house 140 - 122,500 122,500 122,500 122,500 - 490,000 Hay fields materials herder 200 - 175,000 175,000 175,000 175,000 - 700,000 Technical Support Group office upgrade unit 10,000 - 12,500 12,500 12,500 12,500 - 50,000 Soum PUG office unit 10,000 - 12,500 12,500 12,500 12,500 - 50,000 Water/ wells unit 9,500 - 190,000 190,000 190,000 190,000 - 760,000 Geophysical Surveys well 505 - 10,100 10,100 10,100 10,100 - 40,400 Land Manager computers IT set 2,000 - 5,000 2,500 2,500 - - 10,000 Information Materials soum 4.00 - 20,000 10,000 10,000 - - 40,000 Soum Reserve area deep wells herder 10,000 - 25,000 12,500 12,500 - - 50,000 Geophysical Surveys well 505 - 1,263 631 631 - - 2,525 Soum Reserve area animal shelters shelters 2,500 - 37,500 18,750 18,750 - - 75,000 Soum Reserve area signboards unit 100 - 500 250 250 - - 1,000 Environmental Baseline Assessments ls 30,000 - 30,000 30,000 30,000 30,000 - 120,000 PVU 19,010 - 109,346 109,346 - - - 218,692 SAU computers IT set 2,000 - 5,000 5,000 - - - 10,000 SVU computers IT set 2,000 - 5,000 5,000 - - - 10,000 PVU marketing materials herder 2 - 4,346 4,346 - - - 8,692 PVU equipment and supplies unit 5,000 - 33,750 33,750 - - - 67,500 Animal Health Books herder 5 - 9,375 9,375 - - - 18,750 Technical booklet herder 3 - 5,625 5,625 - - - 11,250 PVU upgrade unit 5,000 - 33,750 33,750 - - - 67,500 Soum vaccine storage unit 5,000 - 12,500 12,500 - - - 25,000 PLMU - 102,644 102,644 97,663 97,625 - 400,575 Basic Eartags (PLMU) unit 1 - 12,500 12,500 12,500 12,500 - 50,000 Basic Eartags Applicators (PLMU) unit 50 - 1,250 1,250 1,250 1,250 - 5,000 125

Unit Cost by Year ($) Cost Total Sub-Agreement/Item Unit ($) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ($) Record book set (PLMU) unit 100 - 750 750 750 750 - 3,000 PLMU technical info manual unit 15 - 19 19 38 - - 75 Weighing Scales (PLMU) unit 900 - 4,500 4,500 4,500 4,500 - 18,000 Marketing materials (PLMU) unit 5 - 3,125 3,125 3,125 3,125 - 12,500 PLMU computers IT unit 2,000 - 5,000 5,000 - - - 10,000 Livestock Marketing Facility unit 20,000 - 25,000 25,000 25,000 25,000 - 100,000 PLMU Fodder Storage Facility unit 20,000 - 25,000 25,000 25,000 25,000 - 100,000 PLMU office unit 10,000 - 12,500 12,500 12,500 12,500 - 50,000 PLMU : Geophysical survey well 400 - 500 500 500 500 - 2,000 Deep wells unit 10,000 - 12,500 12,500 12,500 12,500 - 50,000 PABU - 46,969 46,969 41,469 41,469 - 176,875 PABU Basic Eartags unit 1 - 6,250 6,250 6,250 6,250 - 25,000 PABU Basic Eartags Applicators unit 50 - 125 125 125 125 - 500 PABU Weighing Scales unit 1,000 - 1,250 1,250 1,250 1,250 - 5,000 PABU Marketing materials set 200 - 250 250 250 250 - 1,000 PABU Small hanging digital Scales unit 15 - 188 188 188 188 - 750 SAU eqpt unit 1,000 - 1,250 1,250 1,250 1,250 - 5,000 Male Flock Basic Eartags unit 1 - 4,250 4,250 4,250 4,250 - 17,000 Male Flock Basic Eartags Applicators unit 50 - 1,125 1,125 1,125 1,125 - 4,500 Male Flock Weighing Scales unit 1,000 - 1,250 1,250 1,250 1,250 - 5,000 Male flock Technical manuals unit 10 - 250 250 - - - 500 PABU Technical manuals set 10 - 375 375 375 375 - 1,500 Basic Eartags (Term Sire Flock) unit 1 - 625 625 625 625 - 2,500 Basic Eartags Applicators (Term Sire unit 50 - 125 125 125 125 - 500 Flock) Record book set (TSF) unit 500 - 1,250 1,250 1,250 1,250 - 5,000 Weighing Scales (Term Sire Flock) unit 900 - 1,125 1,125 1,125 1,125 - 4,500 TSF Technical manuals unit 10 - 250 250 - - - 500 PABU signboard unit 125 - 156 156 156 156 - 625 PABU computers IT set 2,000 - 5,000 5,000 - - - 10,000 PABU livestock housing upgrade unit 5,000 - 6,250 6,250 6,250 6,250 - 25,000 PABU building/ office unit 10,000 - 12,500 12,500 12,500 12,500 - 50,000 Housing upgrade for TSF flock (Term unit 2,000 - 2,500 2,500 2,500 2,500 - 10,000 Sire Flock) Housing upgrade for Male Flock flock 500 - 625 625 625 625 - 2,500 PFU and PFLU - 198,256 396,513 198,256 - - 793,025 PLFU Basic Eartags unit 1 - 3,750 7,500 3,750 - - 15,000 PLFU Basic Eartags Applicators unit 50 - 625 1,250 625 - - 2,500 PLFU Record book set unit 500 - 1,250 2,500 1,250 - - 5,000 PLFU Weighing Scales unit 1,000 - 2,500 5,000 2,500 - - 10,000 PLFU Marketing materials unit 200 - 250 500 250 - - 1,000 PFU Fodder plot (fence, well) unit 10,000 - 12,500 25,000 12,500 - - 50,000 PFU Tractor unit 20,000 - 25,000 50,000 25,000 - - 100,000 PFU Tractor Equipment unit 5,000 - 6,250 12,500 6,250 - - 25,000 PFU Feed processing equipment unit 2,000 - 2,500 5,000 2,500 - - 10,000 PFU Hay making equipment unit 5,000 - 6,250 12,500 6,250 - - 25,000 PFU Truck unit 10,000 - 12,500 25,000 12,500 - - 50,000 PFU Sprinkler irrigation unit 5,000 - 6,250 12,500 6,250 - - 25,000 PFU Water tank unit 1,000 - 1,250 2,500 1,250 - - 5,000 PFU Fodder plot establishment unit 5,000 - 6,250 12,500 6,250 - - 25,000 PFU Fodder Storage Facility unit 20,000 - 25,000 50,000 25,000 - - 100,000 PFU & PFLU deep well unit 10,000 - 12,500 25,000 12,500 - - 50,000 Geophysical Surveys well 505 - 631 1,263 631 - - 2,525 PFU office unit 5,000 - 6,250 12,500 6,250 - - 25,000 PFLU Livestock Feedlot unit 23,400 - 29,250 58,500 29,250 - - 117,000 PFLU Fodder Storage Facility unit 25,000 - 31,250 62,500 31,250 - - 125,000 PFLU office unit 5,000 - 6,250 12,500 6,250 - - 25,000 PCPU - 13,750 15,000 26,250 - - 55,000 PCPU: Bags and labels unit 1,000 - 1,250 2,500 1,250 - - 5,000

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Unit Cost by Year ($) Cost Total Sub-Agreement/Item Unit ($) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ($) PCPU: PCPU sorting facility unit 10,000 - 12,500 12,500 25,000 - - 50,000 Total Base Cost - 2,610,097 2,945,847 2,062,488 1,448,138 - 4,314,592 a Excludes in-kind beneficiary contributions PUG = pasture user group, RUA = rangeland user agreement, PVU = private veterinary unit, PLMU = private livestock marketing unit, PFU = private feeds unit, PFLU = private feedlot unit, PABU = private animal breeding unit, PCPU = private cashmere processing unit Source: Consultant’s estimates

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V. CAPACITY BUILDING

A. Overview

400. Capacity building in the project will focus on a number of key institutions, and within each institution on two key areas: (i) strengthening value-chain governance; and (ii) support to subproject implementation through human resource capacity building, development of knowledge products and M&E systems. The main objective of the capacity building is to assist in creating an enabling environment for the aimag subprojects and soum sub-agreements to achieve their objectives. The priority areas for capacity building are related to PUG/RUA development and pasture use.

B. MOFALI

1. Legal and Socio-Economic Environment for Pasture Management

401. The project will support to improve the legal and socio-economic environment for enhanced pasture use. This work will be guided by Article 3.4.1 of the National Mongolian Livestock Program (see Box 4). The project will support three steps of activities (Figure 29).

Figure 29: Steps in Supporting the Legal and Socio-economic Environment for Pasture Management

402. In the first step, the project will begin a series of stakeholder workshops and meetings at soum, aimag and national level to support herders in forming of PUGs/RUAs and in strengthening associations of PUGs/RUAs.

403. In the second step, based on the experience with forming the PUG/RUAs, the project will support the development of laws, such as the livestock tax laws and pasture laws and develop regulations and guidelines to support the implementation of existing laws, e.g. the current Land Law article 52.2. The project support to this process will be support to stakeholder workshops at meetings in soums, aimags and Ulaanbaatar.

404. In the third step, the project will support the rollout of the improved environment through a public information campaign and a training program for government staff and herders (including PUG associations). The project support to training will focus on the target aimags and soums.

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The project will support media programs to inform the public of the new environmental instruments.

Box 4: Article 3.4.1 of the National Mongolian Livestock Program 3.4.1 Improving pasture management 3.4.1.1 Set a single management system for the sustainable use of pasture resources, implement sub-programs, prepare a pasture use map and cadaster at regional, aimag and soum level, define maximum potential stock numbers and develop an information database. 3.4.1.2 Create a legal framework for regulating pasture and protect at least 30% of land as state, aimag and soum level otor reserve area for use during times of hardship. 3.4.1.3 Link animal numbers and types of herd with pasture carrying capacity and limit the number of animals in areas where pasture capacity is already exceeded and implemented related economic incentives to maintain this provision. 3.4.1.4 Create a legal framework on pasture use fees collected from herders and people with livestock, based on regional characteristics and type of herd and use some portion of it for protecting rangeland or improve its condition. 3.4.1.5 Define clear borders between sites of extensive and intensive livestock production at aimag, capital, soum and district level and enforce it. 3.4.1.6 Combat pasture rodents using technology that is not harmful to the environment or human health. 3.4.1.7 ensure that income from the compensation fees and fees for decreasing the pastureland caused by the mining activities spend for the pastureland improvement activities.

Source: Mongolia National Livestock Program

405. The project will support workshops and meetings related to Steps 1 and 2, media production and training costs related to Step 3 as well as production of information leaflets and training material. The project will provide consultants to support the activities. The base cost of legal and socio-economic environment for pasture management capacity building is estimated at $568,000, and is detailed by year in Table 106

Table 106: Cost of Legal and Soci-Economic Environment for Pasture Management Capacity Building Item Cost ($) Total Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Cost ($) Workshops and meetings in UB - 18,000 18,000 18,000 18,000 - 72,000 Workshops and meetings in region - 10,000 10,000 10,000 10,000 - 40,000 Workshops and meetings in aimag - 64,000 64,000 64,000 64,000 - 256,000 Information leaflets - - - 200,000 - - 200,000 Total - 92,000 92,000 192,000 92,000 - 568,000 Source: Consultant’s estimates

2. Livestock Management Information System

406. Within the framework of the National Program on Mongolian Livestock, MOFALI proposes to establish an integrated pasture use management system including: (i) implementation of subprograms; (ii) creating pastureland use and cadastral maps by region, aimag and soum; (iii) determining the number and types of livestock that can be supported in each area in a sustainable manner; and (iv) creating a database to incorporate all of this information. To implement this, 129

MOFALI proposes to establish a Pasture and Forage Division within the Livestock Policy Implementation Coordination Department with five staff including pasture, forage plantation, agriculture mechanic engineer, plant protection, and information specialists.

407. Conditional on the establishment of this division, the project will support capacity building to develop and manage the proposed Livestock Management Information System (LMIS). The LMIS will provide information to MOFALI to improve policy decision-making and enable MOFALI to fulfil responsibilities for reporting and monitoring as called for in the Mongolian National Livestock Program (Articles 9.1-9.4).

408. The LMIS database will comprise quantitative, qualitative, and spatial information related to livestock production, pastureland use, pasture reserve land, water points, animal shelters, and herder communities. The system will include (geographic) data on the establishment and operation of PUGs and RUAs, other relevant herder communities, water points, pasture reserve areas, and livestock and fiber outputs. (Figure 30). Initially data will be collected on a pilot basis for the project area, converted and processed by the SAUs and integrated into an aimag database by the AFAD prior to consolidation by MOFALI at the national level.

409. The system will be linked to data and information on rangeland monitoring and ecological recovery collected at 1,550 points of the National Agency for Meteorology and Environmental Monitoring through a line point method, and at 4,000 points of the Agency for Land Management and Administration, Geodesy and Cartography through a photo-monitoring methodology. The system will integrate data on livestock from the National Statistical Office. The system will enable analysis of an integrated pasture use management system and enable implementation of subprograms. The system will create pastureland use and cadastral maps by region, aimag and soum. determine the number and types of livestock that can be supported in the area in a sustainable manner and create a database to incorporate all of this information.

410. The system will generate information that can be used to develop targets, to monitor progress and report on livestock productivity and livestock carrying capacities consistent with sustainable systems and natural resource conservation. The system will provide information that can contribute to the estimates of greenhouse gas emissions from livestock and estimates of soil carbon capture.

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Figure 30: Livestock Management Information System Overview

Source: TRTA Consultant

411. The project will finance the LMIS software, GIS software, GPS, desktop and laptop computers, external desks, color multi-function printers, digital cameras, plotters, UPS, drones, video conference equipment, digital maps, and operational support to the project soums, aimags, and MOFALI (Table 107).

Table 107: Equipment Required for Livestock Management Information System Location/Item No. Unit Cost Total Cost ($) ($) Overall 87,000 GIS Desktop software 1 22,000 22,000 Statistical analysis software 1 5,000 5,000 Video conferencing equipment 5 12,000 60,000 Central 1 37,580 GPS 2 520 1,040 Desktop computer 2 1,400 2,800 Notebook computer 2 1,100 2,200 External disks 4 225 900 Color multi-function printer 2 500 1,000 Digital camera 2 770 1,540 Plotter 2 6,700 13,400 UPS 2 615 1,230 Drone 2 5,400 10,800 Office furniture 5 556 2,780 Project aimags and soums 24 197,100 Handheld GPS 24 200 4,800 Desktop computer 24 1,400 33,600 External disk 24 160 3,840 Color multi-function printer 24 500 12,000 131

Location/Item No. Unit Cost Total Cost ($) ($) Digital camera 24 770 18,480 Plotter (aimags only) 4 6,700 26,800 UPS 24 615 14,760 Drone (aimags only) 4 5,400 21,600 Digital maps 24 50 1,200 Total 261,770 Source: Consultant’s estimates

412. A consultant team will be engaged over a period of three years to develop the system, provide training at the central, aimag and soum levels, and to provide support for one year following its handover. The estimated inputs and costs for the TA are shown in Table 108 and the terms of reference for the consultants are in Appendix 1 of the Project Administration Manual.

Table 108: Technical Assistance Costs for Developing Livestock Management Information System Input by Year Total Unit cost Item Year Year Year Year Year Total cost ($) 1 2 3 4 5 ($000s) Consultants (person-months) 26 36 4 0 0 66 145.35 Database specialist/ team 8 8 2 - - 18 2,200 39.6 leader Junior database specialist 8 8 2 - - 18 2,000 36.00 Programmer 1 4 8 0 - - 12 2,000 24.00 Programmer 1 4 8 0 - - 12 1,800 21.60 Graphic designer 2 4 0 - - 6 2,000 12.00 Per diem (days) 108 108 27 - - 243 50 12.15 Vehicle hire and fuel (days) 25 25 25 - - 75 200 15.00 Furniture 5 5 550 2.75 Total Consulting Contract 163.1 Workshops and Training a 152.51 Training 1 1 2 20.00 Workshops (UB & aimags) 6 6 6 18 132.51 a Workshops and training will not be included in the consultant contract but will be financed by the TA. Source: Consultant’s estimates

3. Carcass Traceback System

413. The project will support a process to establish a system of carcass feedback to suppliers, including animal identification systems, that will enable suppliers and processors to comply with market requirements. This will be done in three steps.

414. In the first step, the project will support a series of stakeholder workshops and meetings at soum, aimag and national to review the current governance systems of guidelines, feedback systems, and training programs.

415. In the second step, the project will support a series of stakeholder workshops to review and update regulations and guidelines on carcass traceback systems, including animal identification and animal health requirements, and IT systems. The process will seek to establish a formal structure - a National Consultative Committee on Carcass Traceback Systems – to be an ongoing stakeholder forum. and support development of guidelines or regulations that arise from recommendations of the workshops. The Committee will consist of stakeholders including private sector processing firms, and suppliers, and managers of Private Livestock Marketing Units. This area of work is important in the development of the enabling environment for PLMUs

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and PLFUs, and to a limited extent for sheep terminal sire flocks.

416. In parallel, starting in the first step, the project will support a study on how traceback systems are operating in the field. The first part will be a baseline to capture current experiences in the field (suppliers and processors). This will then become a longitudinal study of selected suppliers and processor linkages. The PLMUs in the project soums should be included in this part of the study as well as other good examples of linkages in non-project areas. The baseline and study will contribute to the development of guidelines.

417. Training program: In Step 3, the project will support, through the RDC, development and incorporation of carcass feedback training into the training programs overseen by the RDC. The project will support development and implementation of a competency-based accreditation scheme for Private Livestock Marketing Unit (LPMU) managers. Participants enrolled in the certificate course will be contracted as consultants to collect the data on their activities.

Figure 31: Process of Work on Carcass Feedback systems

Source: TRTA Consultant

418. The project will support the cost of meetings, workshops, training, training material and manuals and travel associated with the work on governance, human resource development and knowledge products. The JFPR consultants will be the source of consultancy support services for this work. The base cost is estimated at $270,500 and details are in Table 109.

Table 109: Cost of Carcass Traceback System Capacity Building Item Cost ($) Total Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Cost ($) Workshops and meetings in UB 16,000 16,000 16,000 - - 48,000 Workshops and meetings in region 8,170 8,170 8,170 - - 24,510 Workshops and meetings in aimag 20,000 20,000 20,000 - - 60,000 Training materials and manuals 11,500 11,500 11,500 - - 34,500 Total 55,670 55,670 55,670 - - 167,010 Source: Consultant’s estimates

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C. General Administration of Veterinary Services

419. The project will strengthen the capacity of the GAVS in the traceability of livestock and livestock products through the establishment of the Mongolian Animal Health Information System (MAHIS) in the project area. The MAHIS will improve the quality of local veterinary services in order to meet with food safety standard. The MAHIS integrates several subsystems, which assures animal health, quality and hygiene products, and traceability. Establishment of the MAHIS also involves enrolment of processors.

420. The project will supply one set of computers/IT for each of SVUs in the project area. The project will support one training per year at the four-aimag level for on use of the MAHIs. The total cost of capacity building is estimates at $69,000 and detailed costs are set out in Table 110.

Table 110:Cost of General Administration of Veterinary Services Capacity Building Item Cost ($) Total Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Cost ($) SVU Computer IT set 40,000 - - - - - 40,000 Aimag Vet Dept computers IT 8,000 - - - - - 8,000 MAHIS training in region 7,000 7,000 7,000 - - - 21,000 Total 55,000 7,000 7,000 - - - 69,000 Source: Consultant’s estimates

D. Research Development Center

421. The project will support capacity building of the Research Development Center (RDC), formerly known as the National Agricultural Extension Center as well as capacity building of the four Aimag Agricultural Extension Centers under the Aimag Food and Agriculture Departments (AFADs) and 20 Soum Agricultural Offices (SAUs). The center aims to introduce and promote advanced techniques and technologies that are environmentally friendly, low-risk, high-efficiency towards sustainable development of the food, agriculture, and light industry sector, based on the needs of organizations, enterprises, and citizens. Due to its staff shortages, lack of budget, and weak network in local areas, activities to date have not had the expected results.

422. A training needs assessment conducted during project preparation identified the needs for central, aimag, and soum staff, which is proposed to be implemented at the central and aimag levels. In particular: (i) At the central level, RDC and aimag staff will be trained in (a) training of trainers, and (b) professional skills improvement. Professional skills training will include specific areas relevant to the project including improved pasture management, increased efficiency of livestock production through animal breeding and feeding, value addition of livestock products, good agriculture and health practices, and food safety in processing, as well as crop production, processing and packaging, sales and marketing. (ii) For the aimag level, aimag and soum staff will be trained in (a) training of trainers, (b) government policy, modern agriculture practices, (c) agriculture extension services, (d) application of software (MAHIS, LMIS, GIS), (e) professional skills improvement, and (e) communications. Professional skills training will include specific areas relevant to the project including improved pasture management, increased efficiency of livestock production through animal breeding and feeding, value addition of livestock products, good agriculture and health practices, and food safety in processing, as well as crop production, processing and packaging,

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sales and marketing. Staff will also be trained in the application of MAHIS, LMIS and GIS, focusing on sustainable use of natural resources.

423. To ensure the optimum allocation of resources capacity-building training will be conducted at either the central level—attended by central and aimag staff—and the aimag level—attended by aimag and soum staff, depending on the specific courses conducted. For example, training of trainers for central and aimag staff can be conducted at the central level, while technology related training will be conducted at the aimag level. The project implementation consultant will be responsible for training at the central level and will be assisted my center staff at the aimag level. In either case the consultant may engage specific subject matter specialists on a short-term basis as resource persons under their contract.22 The draft capacity building program by year, together with the cost, is in Table 111. The total cost of the capacity building training is estimated at $365,520 In addition, resource persons may be recruited to assist the soum and aimag staff with training that requires specific expertise.

Table 111: Draft Capacity Building by Year and Cost Location/ Training Type Number of Trainees by Year Unit Total Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Cost Cost ($) ($) Central Training - 52 52 - 52 - 65,520 Trainers' training - 26 26 - 26 - 420 32,760 Professional skills improvement - 26 26 - 26 - 420 32,760 Aimag Training 600 400 1,000 - - 300,000 Government policy, modern - 100 - 100 - - 50 10,000 agriculture practices Agriculture extension service - 100 - 100 - - 250 50,000 Application of software (LMIS, - - 400 400 - - 250 200,000 GIS) Professional skills improvement - 300 - 300 - - 50 30,000 Communication, psychology, - 100 - 100 - - 50 10,000 stress management Source: Consultant’s estimates

424. The consultant and the center will cooperate to produce comprehensive training modules comprising a detailed program of specific topics and duration, presentations, handouts, audio- video records and devices; and resources of teachers, materials, and budgets for herders. This is proposed to be repeated annually for four years in order to build up a stock of material Digital training and teaching materials will be developed to provide online courses adapted to broadcasting through different social media. All the knowledge products developed will be stored in the center database. To support this, the project will provide desktop and notebook computers, projectors, multi-function printers, and digital cameras to the center, aimags and soums. Transportation will also be provided to support delivery of agriculture extension services. The base investment cost for this capacity building is estimated at $290,600 and proposed list of equipment and costs are in Table 112.

Table 112: Proposed Equipment and Support for Capacity Building Research Development Center, Aimag Agriculture and Soum Agriculture Unit Location/Item Units/location Unit Cost Total Cost ($) ($) Center 125,400 Web-based training materials & database 1 91,200 91,200 Desktop computer 4 1,100 4,400

22 Resource persons will be engaged under ADB’s Guidelines for the Recruitment of Consultants (2017). 135

Notebook computer 4 1,100 4,400 Projector 4 500 2,000 Multi-function printer 4 400 1,600 Digital camera with support leg 4 350 1,400 Pointer, etc. 4 100 400 Van 1 20,000 20,000 Aimags (4) 94,200 Desktop computer 1 1,100 4,400 Notebook computer 1 1,100 4,400 Projector 1 500 2,000 Multi-function printer 1 400 1,600 Digital camera with support leg 1 350 1,400 Pointer, etc. 1 100 400 Van 1 20,000 80,000 Soums (20) 71,000 Desktop computer 1 1,100 22,000 Notebook computer 1 1,100 22,000 Projector 1 500 10,000 Multi-function printer 1 400 8,000 Digital camera with support leg 1 350 7,000 Pointer, etc. 1 100 2,000 Total 290,600 Source: Consultant’s estimates

E. Inter-Aimag Pasture Use Administration

425. The project will support a series of regional workshops related to development of three inter-aimag reserve areas—Chilen in Tuv and Bulgan aimags covering 34,100 ha, Khukhdel in Uvurkhangai Aimag covering 37,900 ha and Argalant in Bayankhongor and Govi-Altai aimags covering 118,600 ha. The workshops will develop targets and indicators related to the proposed investments and will identify governance issues relating to these areas. Three workshops will be conducted during the project period: (i) the first in year 1 to confirm the planned investments in the three areas; (ii) the second in year 3 to undertake a mid-term review of the development of the areas; and (ii) a final workshop in the sixth year of the project to evaluate the investment and agree arrangements for continuation.

426. The project will support the collection and analysis of technical data from the Inter-Aimag Reserve area managers to feedback to herder groups and policy makers to promote the efficient use of these resources and to improve understanding of their contribution to livestock sustainability during adverse periods.

427. The project will support the Inter-Aimag Pasture Use Administration to collaborate with RDC on training programs related to the reserve areas.

428. The project will support the upgrading of the three reserve pasture areas through investment in animal shelters, rodent control, and fodder crop production. Details of the investments in equipment and materials by reserve are in Table 113.

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Table 113: Investment in Equipment by Inter-aimag Reserve Area Item Unit Quantity by Reserve Pasture Area Unit cost Total costa Chilen Khukhdel Argalant ($) ($000s) Reserve pasture area ha 34,100 37,900 118,600 Total Investment 218.07 Animal shelter no. 10 10 10 3,260 97.80 Mechanical rodent control 15.86 Bird seat (plastic) no. 50 56 174 10 2.80 Smoking tool no. 2 2 2 167 1.00 Opening tool no. 2 2 2 185 1.11 Water trailer (tank, pump) no. 1 1 1 2,889 8.67 Personnel protection clothes sets 40 40 40 19 2.28 Fodder crop cultivation 104.41 Deep wells no. 2 10,000 20.00 Geophysical surveys for no. 2 400 0.80 deep wells Seed (fodder crop) tons 30 333 9.99 Fencing poles no. 10,000 3 30.00 Seeder no. 1 18,519 18.52 7-blade plow no. 1 3,333 3.33 Hay mower no. 1 2,666 2.67 Hay rake no. 1 2,222 2.22 Hay bailer no. 1 16,879 16.88 a Rounded to nearest hundred dollars. Source: Consultant’s estimates

429. Investment in planned capacity building by year for the Inter-aimag Pasture Use Administration is shown in Table 114. Additional needs, particularly at the central level, may be identified during project implementation and financed following agreement with ADB.

Table 114: Cost of Capacity Building for Inter-Aimag Pasture Use Administration by Year ($ thousands) Item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Total Animal shelters 97.80 - - - - 97.80 Mechanical rodent control 15.86 Equipment 13.58 - - - - 13.58 Materials 2.28 - - - - 2.28 Fodder crop cultivation 104.41 104.41 Civil Works a 20.0 - - - - 20.00 Equipment b 43.6 43.62 Materials c 39.99 - - - - 39.99 Surveys d 0.80 - - - - 0.80 Workshops - 35.16 18.16 18.16 35.16 - 106.64 Total - 237.37 18.16 18.16 35.16 - 324.71 a Construction of deep wells. b Includes seeder, 7-blade plow, hay mower, hay rake and hay bailer. c Includes fencing poles and fodder crop seed. d Geophysical surveys for deep wells Source: Consultant’s estimates

Climate-Resilient and Sustainable Livestock Development Project (RRP MON 53038-001)

VI. IMPLEMENTATION AND OPERATING ARRANGEMENTS

A. Implementation Arrangements

430. The executing agency for the project will be MOFALI and the implementing agency will be the Livestock Development Policy and Coordination Department (LPDCD) of MOFALI. The project will be implemented through a Project Management Unit (PMU) located in LPDCD and four Project Implementation Units (PMUs) located in the Aimag Food and Agriculture Departments (AFADs). The project will support construction of office space as required to accommodate these units and the related consultants.

431. A multisectoral steering committee will be established with responsibility for providing guidance during project implementation. The steering committee will be chaired by the State Secretary of MOFALI and will include the representation shown in Table 115.

Table 115: Project Steering Committee No. Position, Institution Role 1 State Secretary, MOFALI Chair 2 Director General, Livestock Policy Implementation Deputy chair Coordination Department, MOFALI 3 Ministry of Finance Member 4 Director General, Policy Planning Department, Member MOFALI 5 Director General, Monitoring, Evaluation and Member Internal Auditing Department, MOFALI 6 Director General, Food Production Policy Member Implementation Coordination Department, MOFALI 7 Livestock Specialist, Livestock Policy Member Implementation Coordination Department, MOFALI 8 Four Aimag Food and Agriculture Departments (In Member rotation) 9 General Administration on Veterinary Services Member 10 Research Institute of Animal Husbandry Member 11 Representatives of participating aimags Member 12 Representative of ADB resident mission Observer 13 Representative of JICA Observer 14 Representative of Embassy of Japan Observer 15 Research Development Center Observer Source: TRTA Consultant

432. Project Management Unit. A Project Management Unit (PMU) will be established within the implementing agency in MOFALI and will be responsible for overall day-to-day management of the project. The PMU will be headed by the Project Coordinator, who will report directly to the Project Director in the implementing agency. The PMU will be staffed by individuals directly hired by MOFALI and financed by the loan. The positions and inputs by year are detailed in Table 116.

Table 116: Staffing of the Project Management Unit Position Year Year Year Year Year Year Total 1 2 3 4 5 6 Project Coordinator 6 12 12 12 12 12 66 Finance Specialist 6 12 12 12 12 12 66 Procurement Specialist 6 12 12 6 6 3 45 Monitoring and Evaluation Specialist 6 12 12 12 12 12 66 Environment Safeguards Specialist - 6 6 3 3 3 21

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Social Safeguard and Gender Specialist - 6 6 3 3 3 21 Communications Specialist 6 6 6 6 6 6 36 Livestock Policy and Contract Management Specialist 6 12 12 12 12 12 66 Pasture Management Specialist 6 12 12 12 12 12 66 Fodder Development Specialist 6 12 12 12 12 12 66 Livestock Management Information System Specialist 6 12 12 12 12 12 66 Support Staff – Administrative Assistant 6 12 12 12 12 12 66 Support Staff - Drivers x 2 6 12 12 12 12 12 66 Source: Consultant’s estimates

433. The terms of reference for each of the PMU staff are in Appendix 1 of the Project Administration Manual.

434. MOFALI will establish four Project Implementation Units (PIU), one in each of the project aimags, which will be headed by an Aimag Coordinator supported by an Administrative Assistant. The PIUs will be located in the Aimag Agriculture Departments and will also include a focal point nominated by the Aimag Governor who is expected to work on a part-time basis. Staffing of a PIU is shown in

Table 117: Staffing of an Individual Project Implementation Unit Position Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Total Aimag Coordinator 6 12 12 12 12 12 66 Administrative Assistant 6 12 12 12 12 12 66 Focal Point a 3 6 6 6 6 6 33 a Seconded from the Aimag staff on a part-time basis. Not loan financed. Source: Consultant’s estimates

435. The PMU and PIUs will be supported for all technical aspects of project implementation by a team of Project Implementation Support Consultants to be recruited under ADB’s QCBS procedures as detailed in Appendix 1 of the Project Administration Manual. The Project Implementation Support Consultants comprise a team at Ulaan Baatar that will provide overall support to the project both in terms of capacity building at the central level and project implementation in the aimags and soums. In the latter role they will, in particular support the four aimag based consultant teams. Provision is also made for the recruitment of short-term subject matter specialists to assist the project consultants in training and other special requirements. The required specialists and their time allocations are shown in Table 118 and their terms of reference are in the Project Administration Manual.

Table 118: Inputs of the Project Implementation Support Consultant. Person months Position Year Year Year Year Year Year Total 1 2 3 4 5 6 Ulaan Baatar-based Specialists 24 79 79 79 73 24 352 Project Implementation Specialist/Team Leader 6 12 12 12 12 6 60 Pasture User Group/Rangeland User Association Specialist 6 10 10 10 8 4 48 Pasture Management Specialist 6 10 10 10 8 4 48 Livestock Specialist 6 10 10 10 8 4 48 Marketing and Agribusiness Development Specialist - 12 12 12 12 6 48 Short-term subject matter specialists - 25 25 25 25 - 100 Aimag-based Specialists (1 of each per aimag) 72 144 144 144 108 36 648 Pasture User Group/Rangeland User Association Specialist 24 48 48 48 36 12 216 Pasture Management Specialist 24 48 48 48 36 12 216 139

Livestock Specialist 24 48 48 48 36 12 216 Total 96 223 223 223 181 60 1,000 Source: Consultant’s estimates

436. The Ulaan Baatar-based team will have a specific responsibility for: (i) evaluating all submitted sub-agreement profiles and proposals, ensuring they are consistent with aimag subprojects and revising as required; (ii) preparing the evaluation of proposals and submitting them to the project coordinator for final approval by the Project Director; (iii) communicating to the Project Director and submitting entities as required the progress of the evaluation process; and (iv) developing Tripartite Agreements approved sub-agreements in collaboration with other PMU staff

437. Short-term Subject Matter Specialists. It is important that project activities are consistent policy directions at the central level in MOFALI, and that project activities can feed into policy discussions at the central level. Also, a range of technical issues are expected to arise in the development and implementation of subprojects and sub-agreements that will benefit from coordination and technical support by central level agencies including research institutes, universities, nongovernment organizations and independent specialists. As the project will involve in many technical areas, the potential list of key counterparts is broad and cannot be defined until the demand is assessed. The project will maintain regular contact with these agencies, on an individual meeting basis as required, and at planning and review workshops as they arise during project implementation, in response to the demands of support for subproject development, review, and implementation.

438. A separate consultant team will be recruited for capacity building for meat traceability and feedback systems under the JFPR-financed technical assistance (Table 119).

Table 119: Proposed Capacity Building for Meat Traceability and Feedback Systems Consultants Person-Months Position Year Year Year Year Year Year Total 1 2 3 4 5 6 Capacity Building Specialist/Team Leader 12 12 9 - - - 33 Livestock Identification Specialist 12 12 6 - - - 30 Veterinary Specialist 4 6 4 - - - 14 Agribusiness Linkages Specialist 12 12 6 - - - 30 Food Safety and Traceability Specialist 12 12 6 - - - 30 Field Food Safety and Traceability Expert 12 12 6 - - - 30 Total 64 66 37 - - - 167 Source: Consultant’s estimates

439. Aimag Focal Point. An Aimag Focal Point will be appointed by the governor in each aimag to ensure that project activities are consistent with policy directions at the aimag level, and that project activities can feed into policy discussions. Also, a range of technical issues are expected to arise in the development and implementation of subprojects and sub-agreements that will benefit from coordination and technical support provided by aimag level agencies.

440. Soum Technical Team: A soum technical team (STT) will be established by the Soum Governor comprising the Soum Land Manager, and the staff of the Soum Agriculture Unit and the

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Soum Veterinary Unit. The members of the technical support group will take a lead role in representing the soum government in the development and implementation of various sub- agreements, in particular: (i) The Land Manager will take the lead role in PUG/RUA development and implementation; (ii) the Soum Agriculture Unit will take a lead role in all second-generation sub- agreements; and (iii) the Soum Veterinary Unit will take the lead role in animal health sub-agreements.

441. The Soum Governor will appoint one member of the STT as the Soum Focal Point responsible for: (i) acting as a member of the SSC; (ii) leading the coordination of the Technical Support Group and collaboration with the ATWG and the project consultants; (iii) completing six-monthly progress reports and submitting them to the PMU; and (iv) maintain regular telephone and email contact with the Aimag Project Coordinator and consultants for troubleshooting on project management issues.

442. Soum Steering Committee. Each participating soum will establish and maintain throughout project implementation a Soum Steering Committee (SSC) in the governor’s office. The SSC will be chaired by the Soum Governor with participation of soum officials, beneficiaries and service providers (Table 120).

Table 120: Composition of Soum Steering Committee Title Role Term Soum Governor Head of SSC Permanent Soum Citizen Khural Representative Member Annual rotating Soum Social Welfare Officer Member Permanent Chiefs of all Bags (One Rep.) Member(s) Annual rotating PUGs Representative a Member Annual rotating Head of SAU Member Permanent Soum Focal Point Member/secretary Permanent a It assumed that there will be more than one PUG in the soum, so one PUG leader should be on the committee, but represent all PUGs. This member should be a rotating position similarly to a Soum Citizen Khural representative and a chief of bag. Source: TRTA Consultant

443. The overall responsibility of the SSC will be to: (i) ensure integrated project implementation at the soum level and inter-agency cooperation and coordination; (ii) review progress and plans; (iii) review submitted sub-agreement profiles and proposals to the aimag consulting team.

B. Implementation Schedule

444. The overall implementation schedule is shown in the Project Administration Manual.

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C. Operation and Maintenance of Project Investments

445. Civil works constructed through the support of the project will be operated and maintained according to relevant government regulations.

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VII. CRITICAL RISKS

A. Lack of Water in Proposed Wells

446.

B. Extreme Climate

447. The climate of the country is characterized as continental with four seasons in a year. There are high fluctuations on temperature on seasons and even day and night, and low precipitation. The annual mean air temperature varies between -8 ... 8 °C, 10 ... 26°C in summer and -15 ...- 30° C in winter. 85% of precipitation falls during the warm season. Assessment with the CENTURY model, the air temperature will continue to rise steadily, with an average increase of 2.20C in 2016-2035 compared to the base period of 1986-2005.

448. Due to the climate change, the lakes, ponds, and rivers are drying up and water resources are declining in Mongolia. A frequency of natural disasters such as droughts and dzud has increased, adversely affecting livestock sector. For instance, due to the dzud in the spring of 2020, the Erdenemandal soum lost 60 thousand, and the Khairkhan soum lost 40 thousand head of livestock. By the middle of this century, the percentage of livestock losses due to the dzud is expected to reach 5.5% of the herd at the beginning of the year, and 7.6% by the end of the century. The proposed project addresses such natural disasters through its proposed activities, specially the collaborative pasture management and the linkage between herders and factories.

449. The forest fire will be another risk in for those soums with forests in Khangai area, and the windstorm is for those soums in govi areas. Capacity building training will address such natural disasters through its capacity building program on making fire break strips surrounding khot ail and providing the barometers.

C. Alignment with Interests and Expectations of Farmers and Other Stakeholders

450.

D. Health Emergencies

451. The project target soums are located in peaceful areas in terms of animal health, where there is no record of “A” class animal diseases, and contagious diseases transmitted from animals to humans, such as FMD, anthrax and brucellosis. Besides of the public service units, there operate 54 private veterinary services in 20 soums operating in the target areas, which will be integrated into part of the MAHIS. Also, there will be provided support for strengthening veterinary services through investing required equipment and capacity building training.

E. Livestock Market

452.

F. Operation and Maintenance of Project-Financed Infrastructure

453.

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