SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 1

SCIENTIFIC JOURNAL - AGRICULTURAL ECONOMICS vol. 09, 2018

Ulaanbaatar, Mongolia 2 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

DDC 630015 Э-733

SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS

vol. 09, 2018

Name of the publisher: School of Economics and Business, Mongolian University of Life Sciences

EDITORIAL BOARD: Editor in chief: Professor, Dr. Baasansukh B SEB MULS, Mongolia Members: Professor, Sc.D, Academician Bakey.A MULS, Mongolia Professor, Sc.D. Nyambat L. SEB MULS, Mongolia Professor Wim Heijman Wageningen University, Netherlands Ulirich Koester, Professor, University of Kiel, Germany Professor Luc D’Haese Ghent University, Belgium Professor, Xiu Changbai, Minzu University, China Professor, Qiao Guanghua CEM IMAU, China Professor, Lee Song Kun Daigu University, South Korea

Contributing and cooperating editors for this issue: Dr. Altantsetseg S. MSc Sainjargal Z.

Address: Ulaanbaatar-17024, MONGOLIA Khan-Uul district, 11 khoroo, Zaisan build SEB, MULS

Phone: (976 – 11) 75107777-253 Web site: http://www.seb.muls.edu.mn

ISSN 2519-2000 SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 3

SPECIAL ISSUE

DDC 630015 E-733

Host organization: School of Economics and Business, Mongolian University of Life Sciences Co-organizers: Inner Mongolia Agricultural University, China Inner Mongolia University of Finance and Economics, China Participating institutions: Ghent University, Belgium Wageningen University, the Netherlands University of Natural Resources And Life Sciences, Austria University of Kiel, Germany Inner Mongolia University for Nationalities, China Inner Mongolia Normal University, China University of Paris Nanterre /CNAM/ Slovak University of Agriculture, Slovakia Warsaw University of Life Sciences, Poland University of Agricultural in Nitra, Slovak University of Szeged, Hungary University of Debrecen, Hungary Corvinus University of Budapest, Hungary Szent Istvan University, Hungary Kumomoto University, Japan Tottori University, Japan Daegu University, South Korea Renmin University of China, China China Agricultural University, China Northwest Agriculture and Forestry University, China Huazhong Agricultural University, China Baotou Teachers' College, China Irkutsk State Agrarian University, Russia National University of Mongolia, Mongolia Green Gold project, SDC, Mongolia Pasture Research Center, Mongolia

On behalf of the Scientific Committee and Organizing Committee of International Conference entitled “SUSTAINABLE DEVELOPMENT OF AGRICULTURE AND ECONOMY”, our special gratitude goes to all our keynote speakers and presenters from internal and international partner organization. Please communicate directly to the authors the case you have any specific questions related with presentations.

ISSN 2519-2000 4 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

DEAN’S SPEECH

First of all, I would like to express our sincere gratitude for all guests, professors and researchers. The 7th international conference of “SUSTAINABLE DEVELOPMENT OF AGRICULTURE AND ECONOMY” is supported by the Ministry of Science and Education and the Ministry of Food and Agriculture, which will be held June 21, 2018 in Ulaanbaatar, Mongolia. This conference has been organized by the School of Economics and Business, Mongolian University of Life Sciences (SEB/MULS), and in collaboration with the Inner Mongolia University of Finance and Economy (IMUFE), China. The goal of the conference is to provide a forum for leading representatives from science, industry, and policy-making to discuss various aspects of policy dealing with green economy, natural resource management and sustainable agriculture in globalization. The results of the conference will be challenging but rewarding to implement joint projects and opportunities for integrating agricultural economic development in areas such as agriculture and animal husbandry, natural resources and environment. Participating in this conference many scientists approximately 50 delegations from Asian and European countries such as Germany, the Netherlands, Belgium, France, Hungary, Austria, Slovakia, Poland, Russia, Japan, Korea and China, who will present papers and hold discussions. Also the target audiences for this International conference are primarily those associated with members, observers Scientific Board Committees and project groups of NGOs such as UNDP, FAO, SDC and others working in the area in higher education institutions and government agencies. Lastly, I would like to express our sincere gratitude on the huge effort and continued support for the cooperation and development of the Mongolia. I believe our joint efforts towards building sustainable agriculture and economic growth in Mongolia will be rewarded with everlasting success.

Sincerely,

Prof. Baasansukh Badarch Dean, School of Economics and Business Mongolian University of Life Sciences SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 5

INTERNATIONAL SCIENTIFIC CONFERENCE 2018 SUSTAINABLE DEVELOPMENT AGRICULTURE AND ECONOMY (The Seventh International Conference on Natural resources and Agricultural Economics)

SCIENTIFIC COMMITTEE

Baasansukh Badarch Professor, Dean of School of Economics and Business, Mongolian University of Life Sciences (MULS), Mongolia, [email protected]; [email protected]

Wim Heijman Professor, Wageningen University, Netherlands, [email protected]

Ulirich Koester Professor, University of Kiel, Germany, [email protected]

Luc D’Haese Professor, Ghent University, Belgium [email protected]

Xiu Changbai Professor, Vice President, International Exchange and Cooperation, Minzu University, China, xchangbai@ imau.edu.cn

Huo Xuexi Professor, College of Economics and Management, Northwest Agricultural and Forestry University, China, [email protected]

Qiao Guanghua Professor, Dean of College of Economics and Management, Inner Mongolia Agricultural University, China, [email protected]

Peter Kovacs Professor, University of Szeged, Hungary, [email protected]

Zoltan Szanto Professor, Corvinus University of Budapest, Hungary, [email protected]

Elena Horska Professor, Dean Faculty of Economics and Management, University of Agriculture in Nitra, Slovakia, [email protected]

Michal Zasada Professor, Warsaw University of Life Sciences, Poland, [email protected]

Karoly Peto Professor, Dean of Faculty of Economics and Business, University of Debrecen, [email protected]

Martin Pelikan Professor, Dean Faculty of Economics and Management, Czech University of Life Sciences, Czech Republic, [email protected] 6 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Lee Song Kun Professor, Daegu University, South Korea, [email protected]

Shuichi Torii Professor, Director of Public Affairs at Kumamoto University Student Affairs, Japan, [email protected]

Regis Lanneau Associate Professor, Paris Nanterre University /CNAM/, [email protected]

ORGANIZING COMMETTEE

DIRECTOR: Baasansukh Badarch, Ph.D Professor, Dean, SEB, MULS [email protected] Tel: 976-75107777-253

ASSOCIATE DIRECTOR: Altantsetseg Ser-Od, Ph.D Secretary of COC, Vice Dean, SEB, MULS e-mail: [email protected] Tel: 976-99060801

Yadmaa Zandan, Ph.D Vice Dean, SEB, MULS e-mail: [email protected] Tel: 976-99748787

EXECUTIVE: Bilguun Ganbold International Relations, SEB, MULS e-mail: [email protected] [email protected] Tel: 976-98982262

WEBSITE: Sainjargal Zorigtbaatar e-mail: [email protected] Tel: 976-80098092

Oyun-Erdene Gantulga e-mail: [email protected] Tel: 976-96012387 SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 7

CONTENTS

ORAL PRESENTATIONS

Purev.B, PhD, professor, Bakey.A, PhD & ScD, professor, Nyambat.L, PhD & ScD, professor “The Analysys of the Sustainable Development of Mongolian Agriculture”...... 12

Enkh-Amgalan.D, Hashchuluun.Ch “Natural Resources, Agriculture, and Economic Growth in Transition Countries”...... 14

Deyi Zhou, Dehua He, Liangzhi You, “Ternary Agriculture in Botswana and Its Theoretical Implications”...... 19

Wang Yujie, Eerdun Taoketao, Gu Qidi “The Study on the Problems of Rural Grass-roots Social Management and the Countermeasures - Case of E County in Inner Mongolia”...... 28

Erdenechuluun.T, Ganzorig.G “Situation Analysis to Identify the Threats to the Sustainable Development of the Mongolian Livestock Sector”...... 35

Jeff Bennett, Lkhagvadorj Dorjburegdaa, Enkh-Orchlon Lkhagvadorj, Duinkherjav Bukhbat, Colin Brown “Using Choice Modeling to Assess Grassland Management Policy Options in Mongolia: Herders Perspective”...... 36

Chunmei Zhang “Does Water Rights Trading Promote Economic Efficiency of Water Resource?: A Global Literature Review”...... 40

Erdenebolor Baast, Nyamgerel Bartseren and Alfred Kather “Potential and Options for Increasing Domestic Supply and Use of Livestock Fodder”...... 51

Martin Braun, Peter Schwarzbauer “The Effect of Personal Use of Fuelwood on Market Availability (Sales) in Austria”...... 64

Nyamdorj Doljinsuren, Ariunbold Batkhuu, John Arnold “Preliminary Survey Results of Meat Value Chain Analysis in Mongolia”...... 71

Wang Chunzhi, Zhao Lei , Bao Wenjin “Effect of Rural Labor Force Preferential Transfer on Agricultural Technological Progress”...... 75

Shuichi Torii “Advanced Thermal-Production and Transport Technologies with Biomass to Prevent Climate Change”..84

Kadirbyek Dagys (MSc), Song Kun Lee (prof. dr.), Liesbeth Dries (associate prof. dr.), Bakey Agipar (prof. dr.), WJM Heijman (prof. dr.) “Economic Diversification in Mongolia: Import Substitution and Export Orientation”...... 91 8 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Amar Uuld, Dr.Robert Magda PhD “Estimating Armington Elasticities For Wheat in Mongolia”...... 92

Ganzorig Gonchigsumlaa, Camille Bann “Overview of Current Forest Financial Flows in Mongolia”...... 96

Elena Horska, Khabibullo Pirmatov, Alim Pulatov “Prerequisites for Ecotourism Development in Bostanlik District (Uzbekistan)”...... 105

Jeff Bennett , Lkhagvadorj Dorjburegdaa, Duinkherjav Bukhbat, Enkh-Orchlon Lkhagvadorj, Colin Brown “Using Choice Modeling to Assess Grassland Management Policy Options in Mongolia: Ulaanbaatar Residents Response”...... 111

Bayarsaikhan Zolzaya, Peter Kovacs Ph.D, Purevsuren Munkhtuya Ph.D “The Role of Financial Stability in The State Regulation of Monetary Processes”...... 115

MS. SAMDANKHUU Oyunchimeg, Dr. BATJARGAL Odonchimeg, Dr. Hideo Furutsuka, ENKHSAIHAN Amarsanaa “To Disseminate Suitable Book Keeping System for Mongolian Wheat Family Farms About Theirs Activity Analyses”...... 119

Huixian Xu, Xu Dai “Can Social Capital Help Get loan? A Study of Rural Poor Households in China”...... 127

G.Chuluuntsetseg Ph.D, Ch.Davaasuren MBA “Comparative Study on Salary and Wages of Crop Production Entities”...... 138

Kadirbyek Dagys (MSc), Nyambat Luvsandorj (prof. dr.), Liesbeth Dries (associate prof. dr.), Bakey Agipar (prof. dr.), WJM Heijman (prof. dr.) “Mining Sector Impacts on the Mongolian Economy: Input-Output Analysis”...... 144

Wenlong Li “Influence and Mechanism of Tourism Development on Pastoral Livelihoods in Inner Mongolia Pastoral Areas - Take the Example of the Xila Muren Grassland”...... 145

WANG Shan, LI Jin-kai, NA ri ge le “Research on Spatial Structure of Tourism Cooperation Between Inner Mongolia and Mongolia Based on the “Point-Axis” System Theory”...... 152

Wei Li Si “Analysis on the Performance Evaluation of China’s ‘Returning Grazing- Growing’ Policy - Take Ordos Inner Mongolia for Example”...... 160

Li Jie “A Review of Research on Agricultural Carbon Emissions”...... 166

Bao Zhang, Guanghua Qiao “Herders’ Preference for Incentive Attributes of Compensation and Rewards Policy for Grassland Protection in Inner Mongolia: The Case Study of Ordos”...... 175 SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 9

Yuchun LIU, Chang LIU, Changbai XIU “Research on the Effect of Herdsmen’s Endowments on Their Borrowing Channels Based on Structural Equation Model”...... 188

POSTER PRESENTATIONS

MSc Tumendemberel.G, Ph.D Erdenebayar.M, Sc.D Nyambat.L “Methods to Increase Effects of Agricultural Sector to the General Equilibrium of the Economy” ...... 200

Bulgan Andryei M.Sc, Kitti Zsuzsanna Horváth M.Sc, Dr. Zoltán Pék , Dr. Eszter Nemeskéri1, Dr. Andras Nemenyi1, Prof. Lajos Helyes “Effects of Irrigation and Plant Growth Promoting Rhizobacteria on Processing Tomato”...... 203

Dorjbat.Yo (Ph.D), Nyamaa.N (PhD) “Cashmere Color, Quality and Economic Efficiency /In Example of Zalaajinct-Edren Breed/”...... 207

Erdenetuya.M, Munkhbat.J “Measurement of the Work Values of Mongolia Civil Servants”...... 212

Bat-Od.D Postgraduate, Uranchimeg.P Ph.D “Regarding the Composition of Financial Source of Investment Project”...... 217

Usukhbayar.B (MSc), Zolzaya.G (Ph.D) “Records of Farmland History Note”...... 220

Zolzaya.G (Ph.D), Usukhbayar.B (MSc) “Analyze Using Dummy Variables in the Soil (Examples of Crop Cultivation Centers and Irrigation)”...223

Buyannemekh.P, Narangerel.G “Analysis of the Factors Affecting Stock Return Using A Dymanic Panel Data”...... 227

Shinebayar.D, MSc Oyunbat. R, MSc Future Prospect Analysis of Economic Cooperation of Mongolia and North East Asian Countries ...... 231

Information note ...... 234 10 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 11

ORAL PRESENTATIONS 12 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

THE ANALYSYS OF THE SUSTAINABLE DEVELOPMENT OF MONGOLIAN AGRICULTURE

B.Purev1, PhD, professor, A.Bakei2, PhD & ScD, professor L.Nyambat3, PhD & ScD, professor

1 - Professor, School of Economics and Business, Mongolian University of Life Sciences 2 - Director, Research Center for Agricultural Economics and Development, Mongolian University of Life Sciences, 3 - Professor, School of Economics and Business, Mongolian University of Life Sciences *Correspondent author: [email protected]

Agricultural sector playes a major economy and social role in Mongolia. It has been playing a main role providing foods to population, as well as livelihood to people of rural area. As of 2016, it holds 12% of GDP and as well as 30.4% of employment. There are positive as well as negative influence in development of this industry due to econimic, social and environmental changes in recent 30 years. Thus, we studyed this issue using Index System Method based on Information Entropy. We categorized the factors influencing on agricultural development into following 4 subsystems, and analized with above mentioned method by choosing indicators representating each subsystems:

1. Economic subsystem: - Gross agricultural output per capita (thous. tug/person) - Livestock sector output per capita (thous. tug/person) - Crop sector output per capita (thous. tug/person) - Main agricultural production per capita, (kg) - Productivity of cultivated land (tonnes/ha)

2. Social subsystem: - Human development index (HDI) - Life expectancy index - Education index - GDP, GNI index per capita - Audince of professional art organizations, thous persons - Permanent readers of public library, thous readers - Rural Life expectancy at burt

3. Resource subsystem: - Total arable and Sown area (thous ha) - Pasture and meadows (thous ha) - Total mechanical power per unit of cultivated land(hp/ha) - Well per 10000 ha pasture - Stocking rate, SU per 100 ha pasture - Namber of herders (thousand) - livestock number per livestock specialist (thousand SU) - Cultivated land per crop specialist (thous ha)

4. Environment subsystem: - Average temperature (Kelvin /year) - Precipitation (mm/year) SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 13

- Precipitation and temperature ratio - Livestock sector GHG emission, Methane (thous.tonnes/year) - Degradation of Cultivated area and Pasture land - Damages caused by disasters, (billion tug. at 2010 prices)

Based on the dynamics of these indicators over the last decade trends in 4 subsystems influencing sustainable agriculture were assessed. The subsystem of the economy increases, the social and resource subsystem gradually decreases, but the subsystem’s environmental change is unstable. As a result of 4 subsystems, it shows positive outcome in the agricultural development.

Key words: Environmental, Economic, Resource and Social Subsystem, Sustainable Development Score, Index System Based on Information Entropy. 14 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

NATURAL RESOURCES, AGRICULTURE, AND ECONOMIC GROWTH IN TRANSITION COUNTRIES

D.Enkh-Amgalan1, Ch.Hashchuluun1 1 - National University of Mongolia [email protected]

Хураангуй Энэхүү өгүүлэл нь байгалийн нөөц болон институцын янз бүрийн үзүүлэлтүүдийг ашиглан эдийн засгийн өсөлт болон байгалийн нөөцийн хоорондын уялдаа холбоог судаллаа. Шилжилтийн эдийн засагтай орнууд дах байгалийн нөөц болон хөдөө аж ахуйгаас хэт их хамааралтай байгаа нь авилгалтай холбоотой байх боломжтой байна. 1996-2016 онуудад эдийн засгийн өсөлт болон байгалийн нөөцийн хооронд эерэг хамааралтай. Энэхүү хугацаанд нийт экспорт дахь эрдэс бүтээгдэхүүний экспортыг 1%-иар нэмэгдүүлэхэд эдийн засаг 0.26%-иар өсөх болно.

Abstract This paper examines the effects of natural resource abundance on economic growth using different measures of natural resource abundance and institutional quality. Natural resource abundance does hinder economic growth in countries with grabber friendly institutions but does not in countries with producer friendly institutions. The essence of the argument is that heavy dependence on natural resources and agriculture in transition countries may result in corruption. The finding of this paper is a positive empirical relationship between natural resources (mining and agricultural raw material in total merchandise exports) and economic growth between 1996 and 2016. On average, a one-percent increase in mineral exports in total merchandise exports would have meant up to 0.26 percent more income growth over the period. Key words: natural resource abundance, agricultural raw material, mining, rule of law, control of corruption, institution, economic growth

INTRODUCTION decisive for the resource curse (Sachs & Warner, Sachs and Warner made a major contribution Natural Resources and Economic Development: when they found a negative association between The Curse of Natural Resources, 2001). Roman natural resource abundance and growth in a large et al. suggest that natural resource exports do not cross-country study, and a substantial number of crowd out the manufacturing sector in post-Soviet papers have since considered the natural resource countries possessing sufficiently high institutional curse hypothesis from different points of view quality; those countries lacking such institutional (Sachs & Warner, Natural Resource Abundance quality suffer from the natural resource curse and Economic Growth, 1995). For example, (Roman & Ayaz, 2016). Atkinson and Hamilton Mehlum et al. (2006) show that the interaction show that natural resource abundance may have of natural resource abundance with high-quality negative effects on development when weak institutions-measured by an aggregate indicator-has institutions allow resource profits to be spent in a positive growth effect, while the direct negative government consumption rather than investment, growth effect of resource wealth seems to persist especially in countries with low levels of genuine (Mehlum, Moene, & Torvik, 2006). Countries rich saving (Atkinson & Kirk, 2003). in natural resources constitute both growth losers From a more qualitative angle, historians, and growth winners. The combination of grabber political scientists, and economists generally agree friendly institutions and resource abundance leads that the presence of abundant natural resources ( to low growth. Producer friendly institutions, especially minerals) leads to rent seeking behavior however, help countries to take full advantage of and corruption, thereby decreasing the quality their natural resources. These results contrast the of government, which in turn negatively affects claims of Sachs and Warner that institutions are not economic development (Leite & Weidmann, 1999; SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 15

Auty, 2001; Isham, Woolcock, Pritchett, & Busby, for institutions, using settler mortality, the sample 2004). There is also evidence that natural resource becomes smaller. The signs of the estimated abundance considerably increases the potential of coefficients remain, but some become insignificant. violent civil conflict (Collier & Hoeffler, 2005). Christa N. Brunnschweiler does not confirm And in their case study of Nigeria, Sala-i-Martin the negative effects of resource abundance through and Subramanian describe how “oil corrupts and institutional quality found in several other studies excess oil corrupts more than excessively” (Sala-i- (Brunnschweiler, 2008). The positive results hold Martin & Subramanian, 2003). They stress that the both in ordinary least squares (OLS) and two-stage natural resource curse only holds for mineral-and least squares (2SLS) estimations which consider particularly oil- abundance, and not agricultural the endogeneity of institutions. products and food (all measured by their respective In this paper, we study the transition export shares). economies of the Central and Eastern Europe and Acemoglu et al. question the resource curse Baltics (CEB), the Commonwealth of Independent hypothesis even further when they find no significant States (CIS) and Mongolia. Transition economies income effect of natural resource abundance at produce mining and agricultural raw materials. all, confirming their view that institutional quality For most transition economies the data on major alone can explain a great deal of the cross-country economic indicators became available from 1996 as differences in economic development (Acemoglu, previously they have followed socialist accounting Johnson, & Robinson, 2001). They show, by system. The paper is organized as follows. The using settler mortality as an instrumental for next section presents measuring natural resource institutional quality, that the effect of institutions abundance, section 3 presents data and descriptive on income becomes stronger. Boschini et al., statistics, section 4 presents empirical analysis and, show that interaction effect between resources and section 5 concludes. institutional quality is strong and significant also when institutional quality is instrumented with the MEASURING NATURAL RESOURCE fraction of the population speaking a European ABUNDANCE language and by latitude (Boschini, Pettersson, We examine the natural resource curse & Roine, 2007). When Boschini et al. instrument hypothesis using several alternative measures

Figure 1 Average primary export share of total merchandise exports in our sample of 27 countries of ores and metals, fuels, food and agricultural raw materials in 1996-2000, 2001-2005, 2006- 2010 and 2011-2015. Source: World bank 16 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 of natural resource abundance. Our main broad rate of GDP per capita based on constant local resource measures are the share of primary exports currency. This will be the dependent variable for in total merchandise exports (primexp), and mining the subsequent estimations. It is evident from the exports in total merchandise exports (minexp), data that the growth differences in the sample of 27 taken from the World Bank’s World Development countries are large, with a standard deviation in log Indicators (WDI). GDP per capita growth of 0.39. Row 2 describes To examine whether different types of resource the log of the natural resource abundance indicator have different effects we decompose primexp introduced above, namely mining in merchandise into its four main components: agricultural raw export, averaged over 1996-2016. The difference in materials (agri), food exports (food), fuels (fuel), mining export between the countries in the sample and ores and metals (oresmet). is large, with a standard deviation of 0.92. Row 3 Figure 1 illustrates how the mean export describes the log of the agriculture raw materials shares of merchandise export of the different exports in total merchandise export, averaged over resource types have varied from 1996 to 2015. The 1996-2016. The difference between the countries in fuel export share increased and the ores and metal the sample is also large, with a standard deviation export share decreased somewhat. The mean food of 0.95. export share increased. The mean agricultural raw The last two rows show the main variables materials export share decreased almost 2 times. used to measure institutional quality, which are taken from a World Bank dataset covering different dimensions of governance. DATA AND DESCRIPTIVE STATISTICS RESULTS OF CROSS - COUNTRY Table 1 presents descriptive statistics for the ESTIMATIONS key variables. Growth of per capita GDP during We present our data and econometric 1996-2016 is averaged. Annual percentage growth framework in this section. Our dataset consists of

Table 1. Descriptive statistics Variable Mean SD Minimum Maximum Log GDP per capita growth, average 1996-2016 (lnGDPpcg) 1.40 0.39 0.78 2.16 Log mining/merchandise exports, average 1996-2016, (lnminexp) 2.93 0.92 1.24 4.45 Log agriculture/merchandise exports, average 1996-2016, 1.17 0.95 -0.12 2.86 (agriexp) Control of corruption, average 1996-2016, (corr) 2.16 0.60 1.24 3.41 Rule of law, average 1996-2016, (rule) 2.27 0.72 1.08 3.48 Source: World bank

27 countries during the 1996-2016. We use two different institutional quality Our first main resource measure is the share of indicators, namely measures for rule of law and mining in merchandise exports, minexp taken from control of corruption (described above). the World Bank’s World Development Indicators To better compare the growth effects of (WDI). This is the measure that has been used different natural resource measures, we begin with by many others studying the resource curse. To standard cross-country OLS regressions of the type examine whether different types of resource have used in the resource curse literature. different effects we decompose minexp into its two Table 2 presents results of the linear regressions main components: fuels (fuel), and ores and metals (ores&metals). SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 17

Gi = β 0 + β1Yi + β 2 Ri + β3 INSTi + β 4 Ri ⋅ INSTi + β 5 Z i + ε i , (1)

Where Gi- is the log of per capita GDP power parity (PPP) in 1996, Ri and INST are the between 1996-2016 is PPP adjusted(detailed natural resource abundance and institutional quality variable descriptions and sources are provided in variables, respectively, Z is a vector of other Appendix A) in country i, Y- is a initial income level covariates, and ε is a random error term. expressed by GDP per capita based on purchasing

Table 2. OLS regressions: natural resources (mining and agriculture raw materials exports in total merchandise exports ), institutions and growth (1) (2) (3) (4) (5) (6) (7) (8) -0.24** -0.25. -0.24** -0.25. -0.26** -0.29* -0.25* -0.29* lngdp96 (0.08) (0.13) (0.09) (0.13) (0.08) (0.13) (0.09) (0.13) 0.25** 0.26** 0.25** 0.26* lnminexp (0.07) (0.08) (0.06) (0.09) 0.05 0.07 0.05 0.09 lnagriexp (0.08) (0.09) (0.08) (0.09) 0.28* 0.10 0.23 -0.01 0.18 rule of law (0.11) (0.13) (0.29) (0.20) (0.15) control of 0.34* 0.28 0.04 corruption (0.12) (0.32) (0.22) -0.22 -0.35 -0.21 -0.29 -0.25 -0.40 -0.24 -0.34 openness (0.17) (0.24) (0.18) (0.25) (0.16) (0.23) (0.18) (0.25) 0.87** 0.88. 0.87** 0.85. 0.87** 0.89* 0.87** 0.87. investments (0.28) (0.42) (0.29) (0.43) (0.27) (0.41) (0.28) (0.42) 0.01 0.07 0.01 0.09 interaction term (0.09) (0.10) (0.10) (0.11) Adjusted-R2 0.57 0.27 0.55 0.27 0.60 0.29 0.58 0.29 Notes: Dependent variable is log GDP per capita growth 1996-2015. Standard errors in parenthesis. ., *, **, ***, . statistically significant at 5%, 1%, 0.1% and 0% levels, respectively. Source: World bank

Table 2 shows the results of estimations using However, the economic growth has heavy rule of law and control of corruption. Columns dependence on natural resources for transition show that an abundance of mining has a consistent countries. and strongly significant positive effect on economic growth. All other things equal, the results would CONCLUSION imply that an increase in the share of mining in This paper re-examines an aspect main of merchandise exports would have a fairly large the resource curse, and the limited attention paid positive growth effects if we were to assume a to institutional quality in growth with mining direct causal relationship. abundance. Our results contrast the claims of In all estimations, the rule of law and control Mehlum et al. (2006). of corruption are positive. An increase on the rule We use different measures of resource of law and control of corruption would have had a abundance (agricultural raw materials and mining sizeable positive growth effect, again assuming a exports in total merchandise exports), as well as direct causal relationship. The strongly significant two of institutional quality (rule of law and control negative coefficients for initial income throughout of corruption). Results from OLS estimation shows the growth estimations are in accordance with the that natural resources, and in particular mineral absolute convergence. The interaction term is not resources, have a positive association with real significant. The regression shows that the effects of GDP growth over the period 1996-2016. mining and agricultural resources are positive. 18 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

REFERENCES Resources and Economic Development: 1. Acemoglu, D., Johnson, S., & Robinson, The Curse of Natural Resources. European J. A. (2001). The Colonial Origins of Economic Review , 48, 827-838. Comparative Development: An Empirical 13. Sala-i-Martin, X., & Subramanian, A. Investigation. The American Economic (2003). Addressing the Natural Resource Review , 91 (5), 1369-1401. Curse: An Illustration from Nigeria. 2. Atkinson, G., & Kirk, H. (2003). Savings, NBER Working Paper No. 9804. growth and the resource curse hypothesis. World Development , 31 (11), 1793-1807. APPENDIX 3. Auty, R. M. (2001). The political economy DATA DESCRIPTION of resource-driven growth. European GDPpcg: Log of growth of per capita GDP Economic Review , 45, 839-846. between 1996-2016. Source: World Bank 4. Boschini, A. D., Pettersson, J., & Roine, J. agriexp: agricultural exports in total (2007). Boschini, A. D., J. Pettersson, & J. merchandise exports. Source: World Bank Roine Resource Curse or Not: A Question fuelexp: fuel exports in total merchandise of Appropriability. Scandinavian Journal exports. Source: World Bank of Economics , 109 (3), 593-617. 5. Brunnschweiler, C. N. (2008). Cursing nonfuelexp: ores and metal exports in total the blessing? Natural resource abundance, merchandise exports. Source: World Bank institutions, and economic growth. World minexp: nonfuelexp+fuelexp Development , 36 (3), 399-419. ruleoflaw: Measures the average score of the 6. Collier, P., & Hoeffler, A. (2005). Resource quality of contract enforcement, the police Rents, Governance, and Conflict. Journal and the courts, as well as the likelihood of of Conflict Resolution , 49 (4), 625-633. crime and violence between 1996-2016 within 7. Isham, J., Woolcock, M., Pritchett, L., a range from -2.5 (worst) to 2.5 (best). From & Busby, G. (2004). The Varieties of Kaufmann et al. (2016) Resource Experience: Natural Resource corr: Measures the average score of the quality Export Structures and the Political of the bureaucracy and of public services Economy of Economic Growth. World between 1996-2016 within a range from -2.5 Bank Economic Review , 19 (2), 141-174. (worst) to 2.5 (best). From Kaufmann et al. 8. Leite, C., & Weidmann, J. (1999). (2016) Does Mother Nature Corrupt? Natural lgdp96: Log of real GDP per capita in 1996. Resources, Corruption, and Economic Source: World Bank Growth. IMF Working Papers 99/85, International Monetary Fund . openness: average trade (% of GDP) between 9. Mehlum, H., Moene, K., & Torvik, 1996-2016. Source: World Bank R. (2006). Cursed by Resources or investment: average cross capital formation Institutions? The World Economy , 29 (8), (% of GDP) between 1996-2016. Source: 1117-1131. World Bank 10. Roman, H., & Ayaz, Z. (2016). Natural resources, manufacturing and institutions in post-Soviet countries. Resources Policy, 50, 141-148. 11. Sachs, J., & Warner, A. (1995). Natural Resource Abundance and Economic Growth. NBER Working Paper 5398 . 12. Sachs, J., & Warner, A. (2001). Natural SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 19

TERNARY AGRICULTURE IN BOTSWANA AND ITS THEORETICAL IMPLICATIONS

Deyi Zhou (College of Economics and Management, Huazhong Agricultural University, Wuhan City, China) [email protected] Dehua He (College of Economics and Management, Huazhong Agricultural University, Wuhan City, China) [email protected] Liangzhi You, ( International Food Policy Research Institute, 2033 K Street, N.W. Washington, DC 20006, U.S.A.) Email: [email protected]

Abstract: This paper identifies the ternary agriculture in Botswana, i.e. western style farming, Chinese farming and subsistence farming, and then further generalizes the ternary phenomena in the world. Then it tries to give an explanation from history and culture. Three types of culture, i.e., western trade based, East Asian intensive agriculture based and nomadic economy based cultures, are identified, of which, knowledge form (logic based or experience based) and competition pressure are two key dimensions for economic success. In the same vein, these three cultural modes may help to understand the current ternary phenomena in economic development in the world, and give some predictions for future trends of the ternary phenomena. In the end, the paper provides some policy implications based on the case study of Bostwana. This research doesn’t imply the superiority of any culture since all cultures just happened to adapt to the specific environment, and also doesn’t imply that the economic development is preferable in any sense. However for any country that is pursuing economic development, fair market environment and local entrepreneurs are critical.

Keywords: China, Africa, Ternary Agriculture, Agricultural Technology, Agricultural Extension Services, Agricultural Institutions

INTRODUCTION This paper is intended to describe the ternary The author had been a policy consultant agriculture briefly and indicate their theoretical working in Botswana for one year during December implications. And it is divided into six sections: of 2009 and December of 2010. He found the co- introduction, the subsistence agriculture, western existence of three different types of agricultures style farming, and Chinese farming, discussion coexisting in Botswana, i.e. the subsistence of its theoretical and policy significance, and the farming, western style farming and Chinese conclusions, contributions and limitations. farming, which use very different technologies with very different throughput. This contradicts the SUBSISTENCE FARMING IN prescription of classical economics that claims that BOTSWANA all forms of production institutes will eventually Subsistence Farming is also called traditional become uniform in their technologies and profits farming or communal system in Botswana. Local after long time of the complete competition, but subsistence agriculture is characterized by small gives a concrete illustration of North’s view that scale, self-sufficiency oriented, low input, low culture and mental models lead to path dependence output, land intensive agriculture. and lock-in (North, 1992). Thus the coexistence of Most traditional Botswana farmers belong ternary agriculture may have important theoretical to this category. Botswana has 63,000 traditional and policy implications for understanding Botswana farms in 2009. On average, each traditional farm and even African agriculture problem in general has 1.8 hectares. Farmers usually have very limited and for the failure of international aids in Africa. marketing skills and use simple technologies. Labor 20 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 and land are major inputs. And animals are main production system, also known as traditional draft power. The farmers usually use “broadcast” production system, is the major part of the cattle method to sow the seeds. Usually there is no population, which accounted for 82-85% of whole irrigation (rain fed farming), no fertilization (or just cattle population in 1979-1990, and 93-97% of manure), and sometimes no tillage. whole population in 1995-2004. In the communal The average yield of subsistence farm is about system, pasture is owned by the community. 300kg/ha (sorghum) and 200 kg/ha (maize). Due The ownership of the borehole provides de facto to the instable climate (rainfall), the yields vary possession of the pasture. The inputs in cattle dramatically from year to year. 80% of maize and industry are just labor and water resource. sorghum and 100% millet are produced for self The performances of communal pasture, in sufficiency. Most traditional farmers are very poor, terms of off-take rate and mortality, are usually and rely on government subsidies or aid, especially lower than its commercial counterpart (see Table in drought stricken years. 2). And communal system also has lower market Table 1 shows the traditional subsistence participation. In 2004, communal farmers sold 8.3% cropping system may account for more than 90% of their cattle. They used cattle population as a signal of whole cropping in Botswana in terms of yield of their wealth. They sell the cattle only when they and area planted, and its yields are severalfold need the cash urgently, while commercial farmers lower than commercial farming. For example, the sold 78% of their cattle population in the same sorghum yield of traditional farming is about one period. Although many Botswana officers realized seventh of that of commercial farming in 1990. And that the performance of communal pasture is poor, the traditional subsistence farming coexists with it is hard to initiate a move to privatize the pasture commercial farming for a long time as illustrated due to the political and customary constraints. in Table 1. The similar situation also occurs in animal industry of Botswana. In cattle industry, communal

Table 1 Annual Crop Production, Yield and Area Planted 1980 1990 2004 variables TR CM Total TR CM Total TR CM Total Sorghum Area planted (‘000ha) 43 1468 1807 254 2061 488 118 607 Output (‘000mt) 272 19 291 192 190 382 106 12 118 Yield (KG/planted) 191 449 198 106 748 185 217 n/a n/a Area percent (%) 97.07 2.93 100 87.68 2.32 100 80.49 19.51 100 Output percent (%) 93.37 6.63 100 50.24 49.8 100 90.01 9.09 100 Maize Area planted (‘000ha) 749 54 803 686 113 799 632 6 638 Output (‘000mt) 69 47 116 43 75 118 72 3 75 Yield (kg/planted) 92 873 144 62 664 147 114 506 118 Area percent (%) Output percent (%) 93.28 6.72 100 85.86 14.1 100 99.04 1 100 Millet 59.35 40.65 100 36.33 63.8 100 95.85 4.1 100 Area planted (‘000ha) Output (‘000mt) 169 0 169 121 1 122 71 0 71 Yield (kg/planted) 23 0 23 16 0 17 27 0 27 Area percent (%) 134 - 134 134 250 135 379 0 379 Output percent (%) 100 0 100 99.18 0.82 100 100 0 100 100 0 100 98.48 1.52 100 1000 0 100 Source: Botswana Institute for Development Policy Analysis, Botswana Agriculture Sector review, Final Draft Report, April, 2009 TR- Traditional Farming, CM- Commercial Farming SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 21

Table 2 The Performance difference Between Botswana Communal and Commercial Pasture in 2000-2009 Indicator 2000-2004 2005-2009 Calving rate Communal Pasture 50% 58% Commercial Pasture 51% 59%

Off-take rate Communal Pasture 10% 9.5% Commercial Pasture 14% 12.5% Mortality Communal Pasture 12% 9% Commercial Pasture 4.5% 5% Source: Viability and Long Term Development Strategy for Livestock Subsector, March 2006

Table 3 also shows that traditional sector of cattle industry has lower birth rate, lower offtake rate and higher mortality rate than that of commercial one from 1980-2004.

Table 3: The Comparison of Cattle Productivity Indicators between Traditional Farming and Commercial Farming Productivity Indicator (Percent)

Year birth rates mortality rates offtake rate

Traditional Commercial Traditional Commercial Traditional Commercial

1980 58 60 14 4 8 14 1985 54 56 24 6 13 22 1990 62 70 13 4 10 18 1995 61 60 14 8 7 4 2000 51 33 6 3 11 2 2004 54 49 22 5 8 12 Source: Botswana Institute for Development Policy Analysis, Botswana Agriculture Sector review, April, 2009

In sum. Subsistence farming in Botswana is was the colony of Britain in 19 century. a land intensive agriculture with lower input and In 2009 Botswana has 112 farms which have lower output and simple technologies. It is mainly each over 150 hectares. All of them are highly for self-sufficiency and relies on the climate, mechanized. And some farms are equipped with its yields vary dramatically from year to year. advanced computerized drip irrigation system. The Although Botswana government in recently years cereal yield of commercial farm can reach 2500 kg/ strongly promote commercial farming, traditional ha, several times higher than that by subsistence farming has been dominant in Botswana agriculture farms. A few farms in Pandamatenga can provide for decades. 80% of domestic product of Botswana. (Botswana Agriculture Sector Review, Botswana Institute for WESTERN STYLE FARMING Development Policy Analysis, 2009). Along with traditional farming for long time, Table 1 and 2 show the yields of crops in there is a small proportion of commercial farming commercial farming are much higher than those in in Botswana (Table 2 and 3). The commercial subsistence farming. farming system also can be termed western style Similarly, there are commercial livestock farming system since it is characterized by large production systems which have a better performance scale, capital intensive, science based farming and than the traditional animal production system in it dates back to the colonial time when Botswana offtake rate, birth rate and mortality (Table 2 and 3) 22 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

CHINESE FARMING fertilizer. So the total investment of the business As the time going on, more and more Chinese is about 100,000 Pula or USD 13,500. The annual come to Botswana, and bring there the Chinese net income is almost the same. Surprisingly, most farming system. The author witnessed the three farmlands around Mr. H’s farm are idle. Chinese vegetables farmers coming to Botswana at The third one is Mr. L. He graduated from one different time. university, majored in forestry machinery. He is The first one is Mr. S from Taiwan. In 1960s around 30 years old and speaks good English. He Mr. S was 19 years old, and just graduated from once worked in a Chinese construction company high school. He was sent by Taiwan authority as in Botswana for 2 years. Noticing the high profit an agricultural technician to help local Botswana in vegetable, he quited his job in 2007, and started farmers growing vegetables. One year later, the his own business of growing vegetable. Since he project was stopped. He returned to Botswana by did not know much about agriculture, he invited himself and established a vegetable farm growing his former classmate in primary school, Mr. Z, a vegetable. He seems quite successful and his family Chinese farmer from Northeast China with little belongs to the upper class of Gaborone. Although formal education to work with him. They rent 2 they are rich enough and about 70, they still use hectare from Mr. L’s former local colleague, and the idle land below the citrus trees (belongs to his hired about 10 local Botswana to grow vegetable Iranian friend) to grow different vegetables and sell and sell to Chinese companies in Botswana. One them in China Town of Gaborone. He hired a few year later the bore hole on that land was depleted local Botswana farmers to help them. Although and they moved their production team to the suburb they just have a small piece land, but it is very of Gaborone and rent 10 hectares land near the productive and lucrative. drainage canal. Occasionally weekend music parties The second one is Mr. H from Beijing suburb. were held to entertain their local employees and He is about 60 years old now with hardly any English. thus increase their morale. In 2007 the investment He is an experienced agricultural technician. In was about 30,000 Pula or USD 4,000. In 2010 his 2002, he happened to be sent by Chinese government total asset was estimated to increase to about 1 to grow vegetable in Botswana. And he found the million pula . vegetable price is very high there. Four years later, From these three scenarios, although quite the project was over, Mr. H stayed and brought his limited, it can be deduced that Chinese farming is family (including his wife, his son and daughter in characterized by small scale, labor intensive, hard law). He rents 0.5 hectares clay land (at 900 Pula working, cost saving, learning by doing (experience per month or about US$ 60) from local farmers to based), market oriented production. It is quite grow vegetable and sells the produce to Chinese lucrative, even though the social environment (such construction companies in Gaborone. His business as the constraints in work permit and language) is was quite lucrative. Since the clay soil is muddy unfavorable. Of course they have the advantage to when it is wet and hard when dry, it is not suitable access Chinese customers there. The stories showed for growing vegetable. In 2009 he moved to another the survivability of Chinese farmers and the great place and rent 4 ha land closer to the city drainage potential for combining Chinese labor forces and canal and with sandy soil. Sometimes he hired African land resources. local Botswana farmers. Though the local farmers complain of low wage, Mr. H also complained their THEORETICAL AND POLICY low productivities. Occasionally Mr. H hired some IMPLICATIONS OF TERNARY Zimbabweans who were willing to accept lower AGRICULTURE IN BOTSWANA wage and work hard. But Mr. H mainly relied on Although we have not systematically collected family labors. The major tools used are some pipes the data, the ternary agriculture phenomena in and one diesel engine for irrigation, one small Botswana is very obvious. Furthermore, this tractor, one truck, and one second hand car, and ternary phenomena can also be found in other some self-made hand tools like harrow. Mr. H uses African countries, Southeast Asia and even in some chicken manure from local chicken farms as China. For example, In Zimbabwe, although SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 23 white farmers had set the farms for more than usual judgment is that tradition is an obstacle to 100 years there, and Zimbabwe once was called progress, and to some extent the judgment is right. the “Bread Basket of the Africa”, but when white On the other hand, had it not been for the inertia farmers left in 2000, the local people don’t know of tradition, every power-hungry dictator and every how to use the land and facility efficiently and overconfident and overambitious scientist would the food crisis lasted for more about 10 years. have had no difficulty in subjecting mankind to Many Chinese aiding African projects that once their vast plans for a “rational” society, with the are productive, have been discarded once Chinese probable result that the human species would be experts leave for China because local people don’t defunct by now (Page 360). ” know how to manage them. In recent years, some “Anthropologists and historians have long Chinese companies, like Wanbo Cereal and Oil since thought that the introduction of any economic Company (http://worldstory.org/wswp/?p=11754) innovation in a community is successful only if the and Shanxi Agricultural Development Company community can adapt itself culturally to it, i.e., only (http://pcxwhlyxh.blogchina.com/228683.html), if the innovation becomes socially approved and invest in agriculture in Africa and very successful. understood (Page 361).” “Leonard Doob insisted Although they have rent a large area of land, they that no planning can succeed unless it is based on a use the contract farming business model by hiring knowledge of the social environment, that is, of the many Chinese farmers rather than western style tradition of the people who will be affected by it. An farming that run a big farm by one family. In even stronger thesis is put forward by J. J. Spengler, Southeast Asian, it is well known Chinese are very who argues that the rate of economic growth successful in many fields although they come there depends upon the degree of compatibility between with empty hands. Although their success may not the economic and noneconomic components of the be limited in agriculture, but the basic business respective culture. These observations should not model are same, labor intensive and family based. be dismissed easily, for all analyses of why the Even in some area of Western China mixed Han results of our economic foreign aid often have not people and other ethnic minority, they usually been proportional to its substance coverage on one adopt different agricultural technologies and have explanation: local mores (Page 362).” “A far more different income for many years. And how to familiar case in point is the great economic miracle solve the dual agriculture phenomena and resulting of Japan. There is no doubt in my mind that only poverty of ethnic minority there is a great task the peculiar economic Anschauung of the average for Chinese government for many years. Ternary Japanese can explain the miracle (Page363).” agricultures are not just the game of terminology, North (1992) generally attributed these but are general phenomena, and have their unique phenomena to the mental model or ideology. features respectively and thus important theoretical “Individuals possess mental models to interpret the and policy implications. world around them. These are in part culturally How to explain this ternary phenomena? Why derived—that is produced by the intergenerational don’t the ternary agricultures eventually evolve transfer of knowledge, values, and norms which to be the one with same profit and technology as vary radically among different ethnic groups neoclassical economic theory prescribed? We and societies. In part they are acquired through believe the cultural difference plays important experience which is “local” to the particular roles in this phenomenon. Technologies are parts environment and therefore also varies widely of lifestyle and the cultures. Different cultures with different environments. Consequently there may generate different technologies, and thus they is immense variation in mental models and as a may adapt to their original cultures where they are result different perceptions of the world and the created and have some incompatibility with other way it ‘works.” “Moreover once an economy is cultures. And many economists have also given the on an ‘inefficient’ path that produces stagnation similar but general account. it can persist (and historically has persisted) Georgescu-Roegen (1971), in his book, because of the nature of path dependence.” Entropy Law and Economic Process, wrote: “The “Institutional path dependence exists because of 24 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 the network externalities, economies of scope, them learn other technologies much easier. And the and complementarities that exist with a given responsibility for the sustainability of the family institutional matrix. and the high competition pressure for survival give Lin gives more specific explanation to answer Chinese farmers more motivation to learn from why China initially went ahead of the world but lost the outside and can accept the hardship and make the game since 18th century(Lin, 1995, 2008). His their behavior much more economy oriented. Up to account is that Chinese knowledge is “experience now, Chinese society still has much more anxiety based invention” derived by trial-and-error for for survivability and thirst for money, comparing which big population size will lead to more with other civilizations. But Chinese farmer’s innovations, while western knowledge is “science- learning from the West is not the dialogue with cum-experiment based inventions” derived from same logic, but a kind of imitation. But for Africa, logic thinking and experiment, for which size of the rich land resources and lower competition for population doesn’t matter. His account is intent to survival in their history endows them with simple answer the question asked by Weber and Needham experience technologies and weak incentive to (1954, 1981) and Weber (1968, 1997). While Lin’s learn from others. The wealth sharing culture explanation is interesting, but his focus is only on within the tribe may further weaken the property the comparison between China and the western right and individual incentive for wealth and world, and does not include African cultures in his investment in younger generation. This may help to analysis and give not detailed explanation for why explain the general ternary economic phenomena, China can learn from the west successfully. i.e. the long coexistence of the western world, the We believe that the ternary agricultural rapid developing East Asia and the stagnant rest phenomenon may have more theoretical of developing countries. And it may also have implications for further exploration, which may some explanatory power for the financial crisis in involve the cultural differences among western Southeast Asia in the late of 1990s. While other East trade based culture, Chinese intensive agriculture Asian countries or regions, such as Hong Kong, based culture, and extensive agriculture and Korea, Japan, Taiwan, and Singapore stepped out nomadic economy based culture (Table 4). Western of the crisis, other Southeast Asian countries are culture is based on industry and trade economy still struggling in the crisis. Furthermore, it may and individualism, which endowed them with contribute to the explanation of current financial strength in logic analysis and science which can crisis faced by USA and European countries and derive conclusions beyond our direct experience long time economic stagnancy of Japan under the which are necessary for running large scale farm. background of fast development of China, and also Chinese culture is from long history of family based can explain the economic development difference labor intensive agriculture under high competition among regions within China. To give a detailed pressure for survival. This special history bestowed explanation and full exploration of the ternary Chinese farmer sophisticated experience based phenomena will go beyond the scope of this paper. knowledge, versatility and flexibility, which make

Table 4. Summary of Three Kinds of Culture Competition, Knowledge Typical Communal Information Economy base population form Artifacts life accessibility density West High, high Stone civil culture Industry and Trade population Logic Individual Open access architecture density East Asia High, high Earthwork and Experience Labor Intensive agriculture population wood civil Family Semi-closed based density architecture Rest of the Nomadic, Land intensive Low, low Experience world agriculture, Hunting and population Hut, tent Tribe Close based gathering density SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 25

Although western world and East Asia the absorbability of exogenous technologies. Or achieved economic progress, the purpose of paper exogenous technologies are incompatible with local does not imply any superiority of any culture, but ones. What they need is the different technologies just for the sake of scientific explanation of ternary or different way of providing technology. agriculture. Different cultures have been formed Developing countries don’t lack technologies in long histories. They just adapted and shaped by and investment, but need fair market and different environments. Once they were formed, entrepreneurship. The future external intervention they have some rigidity to be changed. The culture should help to maintain a fair competitive plays multiple functions in very long time, which environment, which is the key element for are beyond human rationality as Hayek says. We technology development in western world and can’t make a judgment of the superiority of a China. As North (1992) says: “While some learning culture in terms of its economic performance in is a result of idle curiosity, the rate of learning a short run or even in long run, nor can we make will reflect the intensity of competition amongst the judgment in terms of its adaptability to modern organizations. Competition is a ubiquitous western technologies. Different cultures have consequence of scarcity and hence organizations different strengths and weaknesses. The cultural in an economy will engage in learning to survive. diversity makes the world much more interesting But the degree can and does vary. If competition is and colorful, and makes the human kind as a muted as a result of monopoly power the incentive whole more prepared and more flexible toward to learn will be reduced. The rate of learning the uncertainty in the future. Culture superiority is determines the speed of economic change, the kind beyond human rationality. of learning determines the direction of economic In the same vain, the paper also does not imply change.” “The kind of learning is a function of the that the developed economy and modernization are expected pay-offs of different kinds of knowledge preferable. On the contrary, the economic crisis, the and therefore will reflect the mental models of the low level of happiness and other social problems players and most immediately at the margin, the in developed world indicate that high income is incentive structure embodied in the institutional not that attractive. In addition, hedonism and high matrix. If the institutional matrix rewards piracy consumption level does cause a lot of environmental (or more generally redistributive activities) more problems. The developing world should consider than productive activity then learning will take the alternative ways and goals. Current definition of form of learning to be better pirates.” poverty is constructed by developed world. It is The sustainable development must be based solely based on the comparison of income between on the local people and their creativity. African developed countries and developing countries. The countries do have the local entrepreneurs. We poverty should not be based on the absolute income once visited one Botswana farmer. Her name is level, but on the difference between current income Kebinakwena Kgabo. She used 12 hectares (her and expected income of people. That means that own and rent land) of land to grow lablab, a kind some rich people may be poor if they have much of drought resistant high quality fodder, and sold higher expectation for income. On the other hand, it to the dairy farmers. The main labor was family people in developing countries can be rich and have members. During the harvest season, she also hired a higher happiness level because they have lower local farmers. Her family earn about USD 4800 per expectation for their future income and pursue year from fodder production, which is good income something else. in Botswana. Actually this kind of business needs However, if people think economic growth little capital. And a lot of idle land is available. But or modernization or westernization is preferable, most youths don’t do it. They feel it is too hard. the ternary agriculture phenomena may have Instead they are waiting for the help from the important policy implications. The above analyses government. imply that Africa doesn’t lack modern technologies Another entrepreneurial example is the former and investment. Many international aids have Botswana President Seretse Khama. He knew both been wasted. The real problem is that it lacks the modern society due to his early education and 26 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 living experience in Britain and traditional Tswana corresponding ternary agricultures in Botswana: tribe based society due to his growing up in the tribe. western trade and science based knowledge, He successfully transformed Botswana society from Chinese labor intensive agriculture and experience traditional social system to be a modern democratic based knowledge, African land intensive agriculture society, which makes Botswana a miracle among and experience based knowledge. African countries. The ternary phenomena may also have Entrepreneurs may come from outside. The some policy implications. Western farming have developing world should encourage the international existed in Africa for more than 100 years, more investment especially from private sectors that will and more Chinese farmers go to Africa, and encourage the cultural and information exchange. many international aids are pouring in African Unfortunately, nowadays a lot of international aids agriculture with little successes, but African life mainly come from public sectors which simply remain unchanged. The ternary agriculture may pour “free” capitals and technologies for “quick explain why many international aids in Africa development” irrespective of the compatibility failed to achieve their goals. Africa does not lack and acceptability of local cultures, thus not only “advanced” technologies, but lack the absorbability waste of social resources, but also distort the local of external technologies. Or external technologies incentives and discourage local entrepreneurs in the are incompatible with the internal knowledge. long run. That is why the international aids have not Thus we need change our way of aiding, or provide achieved proportional performance (Georgescu- different technologies to involve and benefit local Roegen, 1971). African. Therefore, to study the trans-cultural Admittedly, it is the primary research. The technology dissemination and find the laws in primary conclusions are drawn from personal it may have important policy implications for observations and some second hand data in international and domestic aids of technologies for Botswana. It is more like grounded theory poverty alleviation. approach research, which elicits and reveals the pattern after the full displaying all relevant facts CONCLUSIONS, CONTRIBUTIONS without previous bias. The conclusions and the AND LIMITATIONS explicit hypotheses based on mental models should The paper identified and describe the ternary be examined in other African countries, South agriculture phenomenon in Botswana, which American and China further. For Chinese farmers, is the coexistence of Science based and capital parent-children mutual reliance and economic intensive western style farming, labor intensive support system, responsibility for family reputation agriculture and experience based Chinese farming, and sustainability, sophistication of family life and land intensive agriculture and experience based and household economy, and high competition for subsistence farming. Three kinds of agriculture may survival and strong propensity for economic wealth, originate from three types of cultures, i.e., western endow them with unique knowledge structure and trade based, East Asian labor intensive agriculture learning and innovation ability. And African farmers based, and land intensive and nomadic economy may show the difference in adopting technologies based cultures, which are formed in long histories from China and the West. These points need to be of specific geographic environments respectively. explored further. This ternary agriculture phenomenon may have important theoretical implications. It is in ACKNOWLEDGE the same line of arguments of North (1992) and Thanks to the Ministry of Agriculture of China Georgescu-Roegen (1971), but gives concrete and Chinese Embassy in Botswana, I could work and specific illustrations in agriculture based on in The Division of Policy Research and Statistics, author’s personal observation. And the research also Ministry of Agriculture of Botswana, which gave expands the analysis of Lin (1995, 2008) since it me an unique opportunity and enough time to includes the knowledge issue of African agriculture experience Botswana culture and collect the data for and explicitly puts forward three new concepts this research. I am grateful to my former Botswana SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 27 colleagues, Ms. Mmadima Nyathi, Ms. Bantle Pretty the Weber question, and China’s miracle: Mogapi, Peter and other unnamed from Ministry Long-term performance since the Sung of Agriculture of Botswana who gave me a lot of dynasty, China Economic Journal, Volume help in my life and work. I would also express my 1, Issue 1, pages 63-95 ,2008 thanks to my Chinese colleagues in Botswana, Mr. 5. Needham, Joseph. Science and Civilization Ping Wan and Mr. Zhihua Dong. Sincere thanks in China. Volume 1. Cambridge: to Mr. Shilong Cao and Mr. Ze Xiong and Yueji Cambridge University Press, 1954 Zhu for their careful reading and comments, and 6. Needham, Joseph. Science in Traditional Special thanks goes to Prof. Liangzhi You from China: A Comparative Perspective. International Food Policy Research Institutes and Cambridge, MA: Harvard University Dr. Abu Kargbo from Sierra Leone, who gave a lot Press, 1981 of critical comments on the content and corrections. 7. Needham, Joseph. The Grand Titration: This research is partially supported by the Project Science and Society in East and West. Natural Science Foundation of China “The Model London: George Allen & Unwin, 1969 and Performance of Chinese Agricultural Aid in 8. North, Douglass C. The new institutional Africa” (71228301). economics and development, the essay drawn from the John R. Commons REFERENCE lecture given at the American Economic 1. Botswana Institute for Development Association meetings in January 1992, and Policy Analysis, Botswana Agriculture subsequently published in the American Sector Review, April, 2009 Economist (Spring 1992, pp3-6) under the 2. Georgescu-Roegen, Nicholas, The Entropy title “Institution and Economic Theory” Law and the Economic Process (1971). 9. Weber, Max The Protestant Ethic and “The Harvard University Press: Cambridge, Spirit of Capitalism” (1905). Translated Massachusetts. by Stephen Kalberg (2002), Roxbury 3. Lin, Justin Yifu, 1995. “The Needham Publishing Company. Puzzle: Why the Industrial Revolution 10. Weber, Max. “Confucian Politics in China Did Not Originate in China,” Economic and the Sprout of Capitalism in China: Development and Cultural Change, Cities and Industrial Associations”. University of Chicago Press, vol. 43(2), Collected Works of Max Weber: The pages 269-92, January. Historical Steps of Civilizations, Shanghai, 4. Lin, Justin Yifu, The Needham puzzle, Shanghai Sanlian Bookstore. 1997. 28 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

THE STUDY ON THE PROBLEMS OF RURAL GRASS-ROOTS SOCIAL MANAGEMENT AND THE COUNTERMEASURES CASE OF E COUNTY IN INNER MONGOLIA

Wang Yujie, Eerdun Taoketao, Gu Qidi

School of Public Management, Inner Mongolia University of Finance and Economics Graduate School, Inner Mongolia University of Finance and Economics, Graduate School, Inner Mongolia University of Finance and Economics,

Abstract: With the deepening of the reform and the acceleration of social transformation, the rural society in China is undergoing profound changes. It has put forward higher requirements for the rural grass-roots social management, and also exposes the defect of social management in the traditional rural grass-roots level. At present, the main challenges are: the income gap between urban and rural areas is increasing, the village level management is weak, the rural social security is not perfect, and the rural social management is facing more complicated problems. The difficulties faced by the grass-roots social management in rural areas: the organization is weak and unbearable; unstable cadres and lack of successors; economic strength is difficult to support social management. This article selects the E county in Inner Mongolia as the case study object, analyzes the current situation, the existing problems and the reasons of the rural grass-roots social management and puts forward some suggestions.

Key words: rural grass-rootssocial management, rural Party organization, management idea, grass- roots management organization

INTRODUCTION rural areas includes township governments, village With the deepening of reform and the committees, village Party branches, various social acceleration of social transformation, the rural organizations, village collective organizations and society in China is undergoing profound changes. all villagers. China’s rural population accounts On the one hand, the rural economy has developed for the majority of the national population. They rapidly and the living standards of the peasants constitute the stabilizer and reservoir of China’s have risen sharply. On the other hand, the peasants’ modernization. Ensuring the stable development ideas and rural life styles have changed profoundly, of rural areas is inseparable from the scientific the demand for public goods and services such as management. infrastructure, living environment and the appeals of vital interests are put forward. In particular, if BACKGROUND the contradictions involved in the own interests of The challenges to the rural grass-roots the peasants can’t be properly handled, It is likely social management to evolve into a group event. Therefore, rural With the development of economic society, areas have become the key and difficult points especially the urbanization, the new content and the of grass-roots social management, strengthening higher requirements are put forward to the social social construction and solving people’s livelihood management . It also exposes the insufficiency of problems. the traditional rural social management. Rural social management refers to the government, other social organizations or villagers The income gap between urban and rural carrying out rural social organization activities Despite the continuous introduction of the and engaging in rural social affairs according to policy of “strengthening agriculture and benefiting the country’s rural policies and related laws. The peasants”, and the peasants’ income has grown main body of the grass-roots social management in faster, however, compared with cities and towns, SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 29

Figure 1. Comparison of per capita income and Engel coefficient of urban and rural households (2001-2016) the rural economy is still backward and the income areas; the level of medical expenses compensation level of farmers is still relatively low. And the gap is low; sports health care is seriously lagging behind between urban and rural areas continues to expand. in cities and towns; poor quality of medical and health services in rural areas; the lowest level of The weakening of village level management social security that the peasants can enjoy, the five Reform and decentralization make state insured households’ subsidies, social preferential power rapidly withdraw from rural society. On treatment and disaster relief are relatively low; poor the one hand, the vitality of the rural society has county governments are unable to provide adequate been released. On the other hand, because of the relief for poverty. lack of social cultivation mechanism, the rural society has been constantly deorganized. Rural more complicated problems to the grass-roots collective influence on peasants and organizational social management declined. After the reform of rural tax and fee, in Urbanization has made great changes in the particular, the abolition of agricultural taxes, due way of rural land use. The continuous entry of to the shortage of county and township financial rural population into cities and towns, coupled resources, the management ability of village level with the restriction of rural industrial urbanization organizations and the social management function and household registration system, has triggered a and public service function of government to the series of new social management problems. Such as countryside become weakened. At the village land resettlement, population mobility, rural aging level, most public welfare undertakings rely on the and hollowing out, rural ecological environment masses to raise funds. destruction, urban and rural cultural friction, etc. Rural social management is facing more complex, Imperfect social security in rural areas more innovative and more difficult problems. Since the reform and opening up, China’s rural social security has made remarkable progress, The difficulties faced by the grass-roots but the level and quality still can not meet the basic social management needs of peasants. For example, rural endowment insurance is imperfect, and the service for the The plight of grass-roots management aged is deficient; the social security for land lost organizations - weak and overburdened peasants and migrant workers who are not engaged The rural grass-roots management organization in agricultural production is seriously inadequate; takes the village committee and the village Party insufficient supply of medical insurance in rural organization (“two committees”)as the core strength 30 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

- including rural civil organizations and economic self cognition of most rural grassroots cadres. organizations, etc. The grass-roots organizations The treatment is not ideal and the future is are facing the dilemma of “no activity, no funds, no worried. Rural cadres are basically “work heavier development, no talent”. The mass organizations, than civil servants, and income is lower than migrant as an important force of grass-roots management workers”. Social security of the social managers is organizations, are relatively weak. The rural also very unsound. For a lifetime, the old man has residents themselves are in an unorganized state, to rely on his son. Some of the long serving village lacking enthusiasm and initiative to participate in secretaries and village committee directors were social management, and it is difficult to provide exhausted after their leaving office. necessary support for rural social management. The strength of the grass-roots managers in Overburden of work. The grass-roots rural areas does not match their ambitions. With the government often moves the task down to the village modernization of rural economy and society, the committee. The functions of village committees social affairs in rural areas have increased rapidly, and village Party branches are far beyond their and the requirements for managers have been actual capacity and statutory duties. According to increasing. Village cadres who are half cadres and the survey, the rural “two committees” should sign half peasants are increasingly unable to cope with letters of responsibility every year., from more than modern social management tasks. 80 to 150, every task should be implemented and the pieces are examined. The predicament of the management Shortage of management funds. Every task at foundation - lack of economic support for social the grass-roots level must be supported by a certain management amount of funds, but there is a serious shortage Social management is inseparable from strong of funds available. The funds allocated by the economic strength as the foundation and support. government is always discounted to the grass-roots At present, the main production relationship in rural units for various reasons. areas is the household contract responsibility system The ability of self-government is poor. The with unified family planning. But in practice, the community cannot be the “master” of its own. vast majority of rural areas are “divided”, rarely The “two committees” in the village are tired of “unified” and the collective economy undeveloped. dealing with various tasks arranged by the higher “Hollow village” is not uncommon. Because the authorities, and overdraw their time and energy. collective economic strength of the village is not Engaging in community autonomy and serving the strong enough, the village level organizations can masses of the community seems to be “more than hardly maintain their normal operation, let alone set enough.” The function of residents’ self-governing up public welfare undertakings for the masses. The organizations is covered by administrative affairs, masses do not get the benefits from the collective, which makes it difficult to manage, serve and and they lack the sense of trust for the village develop themselves in rural public affairs. This organizations. In addition, there is no good way. situation has lasted for a long time, and has become Many rural areas have been exploring for many a serious dependence on government departments. years since reform and opening up, but there is still It has become an “appendage” of the government no way to achieve sustainable development. and has lost its autonomy. CASE STUDY The predicament of managers - unstable This article selects E county in Inner Mongolia cadres and weak successors as the research object, expounds the current situation Under the traditional management system, of social management, analyzes the problems the grassroots cadres in rural areas are vague and existing in its social management at the grass- embarrassed. They are “Non official officials” and roots level, and puts forward some corresponding “non-peasants real peasants “.”In the future, there countermeasures. is no rush, no effort at work, no end to pay, no E county is located in the western part of backrest after leaving.” This sentence sums up the Inner Mongolia, with a total population of about 78 SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 31 thousand, with Mongolians, Han, Manchu, Miao, are encouraged to increase their income through Hui and other ethnic groups. Among them, the other channels. In addition, E county has fully Mongolian population accounts for about 30% of played a positive role in maintaining grass-roots the total population. There are 4 towns under the social stability in resolving grass-roots social county, 68 GA Cha villages and 16 community contradictions, mediating disputes between residents committees, which are scattered and peasants, herdsmen and community residents. difficult to manage. The level of economic The core role of “the first responsible person” development is backward, which belongs to the is played in the innovation of social management at less developed areas. E county is rich in natural the grass-roots level. The E county has formulated resources, but in terms of mineral resources and the basic Party construction work plan, the annual animal husbandry, it lacks sophisticated mining plan and the evaluation and evaluation system, technology and sales channels. Generally speaking, so that the Party organization secretaries at all it is urgent and realistic to raise the level of social levels know the specific needs of the peasants and management of E county from a regional or an herdsmen and the problems to be solved through economic perspective. the thorough investigation and research of the grass-roots units. Thus effectively conquering the The main methods of grass-roots social difficulties that restrict the development of peasants management and herdsmen, and paved the way for farmers and At present, the theoretical circles discuss the herdsmen to become rich. E county also carried out problems of rural social management mainly in the the publicity of party affairs, formulated detailed following aspects: how to give full play to the core rules for the implementation of Party affairs, role of the leadership of the Party organization; how established corresponding organizational structures, to further transform the functions of the government and enhanced the transparency of grass-roots Party and build a service-oriented government; how to organizations. To a certain extent, it promoted the strengthen the construction of mass autonomous all-round development of Party building at the organizations and other social organizations, grass-roots level. build a platform for them and play a role in social management; how to unimpede public participation Creating new models in social management channels; how to divide the First, the model of “district cooperation, town responsibilities of Party committees, governments, management and county overall planning” has been social organizations and individual citizens; how to carried out in the communities of the agricultural and give full play to the guarantee of the rule of law. pastoral areas. In the rural pastoral area, E county E county is strengthening the construction of has set up seven rural and pastoral communities in the Party organization at the grass-roots level to the light of the fact that the population is sparse, the promote social management. A new mechanism masses of peasants and herdsmen are absent, and the has been formed for Party organizations and Party grass-roots contradictions are diversified. Explore members to connect with the masses. The aim is to the implementation of the “District cooperation , improve the scientific level of social management town management, county overall planning” mode. by giving full play to the core role of grass-roots Second, the implementation of the “double Party organizations. joint construction” model in the E county ecological restoration area. According to the Innovating the main body of management actual needs of the construction of ecological and Play a vanguard and exemplary role of Party natural restoration areas, E county carried out the members in grassroots social management. E county “double joint construction” activities between the launched “one to one” entrepreneurial activities aid departments and the pair of GA Cha. And to for Party members and cadres. Party members provide services for the transfer of peasants and and cadres are urged to increase support and take herdsmen in employment and entrepreneurship so the initiative to provide information and services that the peasants and herdsmen can be reemployed for peasants and herdsmen to start businesses and steadily. re employment. At the same time, the herdsmen 32 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Problems and causes of grass-roots social and semi administrative, which has weakened the management ability of some social organizations to manage The work of Party organization in E county themselves, resulting in massive backlog of social has indeed promoted the construction of social management and services to the community. At the management at the grass-roots level. However, in same time, the promotion of community social work view of the basic contradictions and basic problems specialization system is obviously insufficient. in grass-roots social management, there are still some fundamental problems that have not yet been The traditional way of contradiction solved. coordination E county grass-roots Party organizations and Traditional management idea Party members have played a certain role in guiding Because of the deep-rooted traditional and coordinating social conflicts in grass-roots units. management idea, many grassroots cadres regard But at present, conflicts of interest are complex. the rural social management as a top-down These are obviously not enough. After investigation administrative command type management. They and analysis, the social contradictions of E county used to adopt simple, rough and compulsory have the following characteristics: First, the subject management mode, and do not allow peasants of the contradiction and dispute is no longer a general to have different opinions, ignoring peasants’ dispute between the urban and rural residents and reasonable appeals. Under such circumstances, if the neighbourhood, but the contradiction between the channels of expression of public opinion are the cadres and the masses, the local and the whole, not smooth, the harmony and stability in rural areas and the trend of diversification; second, in addition will be affected. to the traditional disputes of marriage, support, family, homestead, grass and animal husbandry Lack of emphasis and agriculture and animal husbandry, there are Rural social management involves many many contradictions, such as land expropriation functional departments, and the contents of compensation, relocation and construction, social management are broad. It needs to highlight security, and the rights of residents, and the trend the key points. In the case of E county, the of complexity. The traditional way of contradiction rural social management involves civil affairs, coordination is not compatible with the complexity finance, housing, urban and rural construction, of social contradictions. environmental protection, development and reform, health and family planning, land, agriculture, ountermeasures and suggestions on forest and water, etc. The management contents strengthening the social management of E involved are numerous and complicated, so large county as compensation for demolition, and little to neighbourhood disputes. From the investigation of Innovating management concept, the E county, the grass-roots government of the rural strengthening basic construction and truly putting social management is always busy with the tasks people first assigned by the superior, and can not have a plan, Social management needs not only step and emphasis on social management. On the management but also service, in the service to other hand, due to local financial difficulties, it can achieve management, strengthen services in not increase the burden on the villagers. The funds management. for implementing the rural social management are First of all, E county should provide and seriously insufficient. The effect of management is improve basic public services for residents as the not satisfactory. precondition and important means for the innovation of social management. It is necessary to regard the Lack of professionalization of community employment, social security, agricultural science work and technology, village culture, public health and In the rural and pastoral areas of E county, the mass sports related to people’s livelihood as an work of the villagers’ committee is administrative important part of strengthening social management. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 33

Secondly, attach importance to the construction give full play to their role as bridges and ties. And of grass-roots public cultural service system. The promote the institutionalization, standardization county should establish some public cultural service and procedure of grassroots social organizations’ areas, such as library, reading room and cultural autonomy, and explore social management activity room, and organize the masses to carry functions such as serving the masses, reflecting out various cultural activities or competitions, and demands and regulating disputes, changing the increase the communication and contact between the traditional situation of taking the old, the young, the masses. disabled and the weak as the main participants, so Thirdly, the county need to increase investment as to lighten the working pressure of the grass-roots in social services, make efforts to consolidate grass- community. roots organizations, strengthen grass-roots forces, integrate grass-roots resources and strengthen basic Innovating the ways and means of work so as to truly achieve the satisfaction of the contradiction coordination masses as the starting point. In view of the main characteristics of social contradictions in E county, we should Strengthening the construction of “public solve problems based on fairness and justice and service center” and building a grass-roots social establish and extend effective social management management network networks. In grass-roots social management, we The county should promote the construction of must conscientiously solve the problems of fairness regional public service centers. Taking the regional in income distribution, education equity, equality of public service center as the main body of social citizens’ status in urban and rural areas, and judicial management at the grass-roots level, it should fully justice. In particular, attention should be paid to integrate the functions of social management and the protection of the rights and interests of the public service that the government has transferred. vulnerable groups. We should strengthen the early At the same time, it undertakes the government warning mechanism and control the contradictions management and service functions performed by and disputes in the initial stage, so as to effectively the original village committee, and provide one- handle social contradictions. stop service for various groups in the region, and form a public service network of equal urban and CONCLUSION rural areas. The rural grass-roots organizations are most Integrate the service resources of grass-roots close to the masses. They are the places where management, take the form of government investment cadres and the masses face to face, and are the purchase or low compensation (gratuitous), and focus of social problems. The contradictions and integrate the social service resources such as postal, problems of rural grassroots social management are finance and public utilities. A regional volunteer the key issues that the government and the society service station should be established to attract all should focus on at present. It is not only related kinds of social organizations and enterprises to to the harmony and stability of the countryside, participate in public services, and form a social but also to the development of the whole society. management service network with the public service The original grass-roots social management center as the main management platform and all mode is increasingly unable to adapt to the rapid kinds of social groups, and promote the construction development of rural society. Therefore, it is urgent of three level examination and approval service to creatively innovate the rural social management network in the District, town and community. in order to build a new management system to adapt to the new situation in the countryside and Promoting the development of grass-roots promote the development of the rural economy and social organizations the society. The county should explore the intermediary functions of social organizations, strengthen the social service functions of social organizations, and 34 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

REFERENCES: 5. Wang Yujie, Yangjing. 2016. Practice 1. Ding Yuanzhu. 2010. Thoughts on and Exploration on the Innovation of Establishing and Improving the Grass- Grassroots Social Management in Inner roots Social Management System. Journal Mongolia The Guide of Science & of National School of Administration(5), Education(32): 155-156. 12-15. 6. Weng Ming. 2013. Practice and 2. Gong Weibin. 2012. Exploration Exploration of the Innovation of Rural and Thinking on the Innovation of Social Management. Theoretical Social Management at the Grass-roots Investigation (6), 154-158. level. Journal of National School of 7. Zhang Junqiao, Wang Chen. 2014. Administration(3), 35-40. Research on the Path of Innovation about 3. 3. Li Dedo.2013. The Dilemma and the Rural Social Management in Hebei Innovation of the Grass-roots Level Social Province. Hebei Academic Journal (7), Management in the Border Areas. Journal 218-221. of Yunnan Agricultural University (S2) : 8. Zheng Handong. 2017. The Research on 134-137. Construction of CPC’s Rural Organization 4. Wang Haiyan. 2015. A Study on the Change and Rural Social Management System in of Rural Grass-roots Social Management China. Shan Xi Normal University. System. Xiangtan University. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 35

SITUATION ANALYSIS TO IDENTIFY THE THREATS TO THE SUSTAINABLE DEVELOPMENT OF MONGOLIA LIVESTOCK SECTOR

Ganzorig Gonchigsumlaa1, Erdenechuluun Tumur2

1 Doctor, Senior Lecturer, School of Economics and Business, Mongolian University of Life Sciences, Ulaanbaatar, Mongolia, Email: [email protected] 2 M.Sc, Senior Lecturer, School of Economics and Business, Mongolian University of Life Sciences, Ulaanbaatar, Mongolia, Email: [email protected]

Abstract The livestock sector contributes to the national economy significantly and creates about one third of the jobs. Development policy of Mongolia is in track of ‘sustainable development’ that includes sustainable livestock. However, the sector has been challenged since its collapse of the planned economy in 1990s, mostly related to social, environmental and economic challenges. The aim of the study was to identify challenges of the pastoral livestock sector in Mongolia. The methods used in this paper was reviewing the existing literature, analyzing the secondary data, and focus group discussions. We conclude that the key challenges include: i) pastureland degradation; ii) reduction of the economic efficiency of the sector while reduction of the livestock productivity; iii) animal health, food security and safety; iv) animal breeding and selection; v) farm succession vi) Social, economic, and educational issues of the herders. The government of Mongolia should foster the enforcement of Law on Genetic Fund of Livestock and Law on Protection of Livestock Health both approved in 2017, because these two are key to tackle the challenges significantly. Furthermore, the government should foster its policies to adopt sustainable livestock initiative including Global Agenda for Sustainable Livestock.

Key words: pastureland degradation, economic efficiency, animal health and breeding 36 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

USING CHOICE MODELING TO ASSESS GRASSLAND MANAGEMENT POLICY OPTIONS IN MONGOLIA: HERDERS PERSPECTIVE1

Jeff Bennett2, Lkhagvadorj Dorjburegdaa3, Enkh-Orchlon Lkhagvadorj4, Duinkherjav Bukhbat, Colin Brown5

Abstract This paper aims to identify how the herders would respond to different grassland policy changes using choice modelling technique.

BACKGROUND This paper investigated the changes in the Mongolia is a country heavily dependent on following policy outcomes: livestock breeding with ca 66 million livestock 1. Market expansion heads and a population of ca 3 million (NSO 2. Infrastructure and communication dataset). The transition to market economy from improvement socialist regime in 1991 led herders to increase their 3. Loan size increase animals for higher income. In 10 years, the number 4. Better Loan interest rate and term of herders has tripled. However the increase of the 5. Tradable quota number of livestock was not continuous. Due to 6. Livestock tax harsh winters (dzud) livestock were dying out in The findings of this paper could be a good huge numbers. (Begzsuren et al. 2004; Tachiiri et guidance for the policy makers as there have al. 2008). Many authors are claiming that frequency been no similar research done in Mongolia. The of the dzud has been increasing since the late objective of this current study is to determine the twenty and early twenty first century. (Fernández- herders’ preference towards different grassland Giménez et al. 2012). Even the increased number management strategies. of dzud and drought years has affected in decrease of the herders, Suzuki (2013) found that economic METHODOLOGY alternatives played a huge role such as boom in Choice experiments were first introduced due mining and trade industry. to limitations in using conjoint analysis in studying Even with many goats were duying to dzud transport and telecommunication choices. (Louviere the number of goats increased almost 4 times in 1981a; Louviere et al 1982.) The technique has 20 years since 1990. This increase is mainly due since then been improved and applied to different to herders’ preference of the livestock. According studies of choice in different settings. to National Statistic Office herders has increased In our study choice modelling (CM) technique the number of the goats sharply at first and recently has been applied to herders’ perceptions of the many herders are increasing the number of sheep grasslands of Mongolia. as well. This trend has affected the total number of Choice experiment is a stated preference livestock heavily. Many authors claim that increased technique used to assess people’s preferences livestock numbers and reduced mobility has for different choice alternatives or different sets. resulted in overgrazing of the grasslands especially Choice modelling uses a survey to gather data. in the areas near cities and villages (Okayasu et al. The survey consists of different choice sets which 2007; Wesche et al. 2010). present different levels of attributes.

1 This study is a part of a Mongolia-China-Australia collaborative project fully funded by ACIAR. I acknowledge the help of all who took part and thank ACIAR for their funding. 2 Professor, Crawford School of Public policy, Australian National University, 3 Department of Economics, School of Business and Economics, Mongolian University of Life Sciences, 4 PhD Candidate, Crawford School of Public policy, Australian National University, 5 Professor, School of Agriculture and Food Sciences, Queensland University, SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 37

In Bennett and Blamey (2001) choice The attributes that have been refined experiments are defined to have the following and included in the final version of the choice elements: a set of attributes, which are valued by experiments are as follows. the respondents; a set of levels for these attributes, 1. Market expansion which include the status quo or the current level of 2. Infrastructure and communication the attributes; a set of fixed choice options, which 3. Loan size will present different management strategies for 4. Loan interest rate and term the given resource and the respondents or the set 5. Tradeable quota of subjects who would choose a policy alternative 6. Livestock tax given the different attributes and levels. The study aims to answer the following RESULTS question: In this part the preliminary results are What are herders’ preferences across different presented as the study is still taking place. The policy instruments? socio-economic characteristics of the respondents This study has been done among herders are shown in the following table: of Mongolia. There are 21 aimags in Mongolia in addition to the capital city. 7 aimgas with the Table 1. worst grassland conditions have been chosen Characteristics Value for the population of the survey. These aimags Average age of herder 46 are Arkhangai, Tuv, Bulgan, Selenge, Khentii, Sukhbaatar and Dundgovi. The 7 aimags are Average child number 1.5 considered as stratas. They consist of 110 soums, a Average livestock number 607 smaller administrative unit. Average moving distance per year 31 km 10 soums were chosen randomly from the Average moving times 5 stratas. Initial steps of the survey included focus Herders with loan 90% group interviews and meeting with officials to define the different policy attributes and the most pressing Loan spent on livestock usage 30% issues of herders. The focus group interviews gave Source: calculations from the survey results important insight to the herder population. A pilot The table consists of the average age, average study was done to improve the questionnaire and number of children, livestock number, moving many trials and correction were done in the process. distance and frequency and the number of herders The main survey started in 2018 and is who have taken out a loan from the bank and the in progress. 55 herder households have been percentage of that loan spent for livestock. The data interviewed. The questionnaire takes the form of shows that over 87 percent of the livestock consist one-on-one interview and the numerator follows of sheep and goat. The remaining 13 percent of a pre-written script with the aid of showcards. The livestock consist of horse, cattle and camels. households who are chosen are randomly chosen from The results of the conditional logit model on the list of total households provided from the soum the respondents’ choices are presented in the table officials. If the households in registry is not available below. due to reasons such as moved away to a different The market expansion attribute, infrastructure soum or city next available household is chosen. and communication and tradeable quota are all As the Mongolian countryside is large and estimated to have positive effect on the choice, remote, many times road conditions become a meaning people are willing to choose the given problem and cause delay in the process as well as choice set if these values were higher. However livestock disease quarantine in the period of study. although the expected sign of the infrastructure is However mobile herders are the factor that has the right, the coefficient is statistically insignificant biggest impact and one that taxes the time spent with p value of 0.435. taking the questionnaires the most. The interest rate and the livestock tax had negative coefficients as expected. Which means the 38 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 higher the interest rate for loans and higher tax was estimate is statistically insignificant with p value not favored by the herders. of 0.437. As data is limited further discussions of The loan size was estimated to have negative results would be available at a later time when more effect, contrary to expectation. However the data is collected.

Table 2.

REFERENCES Oecologia 163: 1091–1102. 1. Begzsuren, S., Ellis, J. E., Ojima, D. S., 6. Fernández-Giménez, M., Batjav, B., and Coughenour, M. B., and Chuluun, T. Baival, B. (2012). Lessons from the Dzud: (2004). Livestock Responses to Droughts Adaptation and Resilience in Mongolian and Severe Winter Weather in the Gobi Pastoral Socio-Ecological Systems. World Three Beauty National Park, Mongolia. Bank, Washington DC. Journal of Arid Environments 59: 785- 7. Jamsranjav, C. (2009). Sustainable 796. Rangeland Management in Mongolia: The 2. Bennett, Jeff, and Russell Blamey. Role of Herder Community Institutions. The Choice Modelling Approach to Land Restoration Training Programme, Environmental Valuation. Edward Elgar, Reykjavik. 2001. 8. Lecraw, D. J., Eddleston, P., and McMahon, 3. Dagvadorj, D., Natsagdorj, L., Dorjpurev, A. (2005). A Value Chain Analysis of the J., and Namkhainyam, B. (2009). Mongolian Cashmere Industry. USAID Mongolian Assessment Report on Climate Economic Policy Reform Competitiveness Change 2009. Ministry of Environment, Project, Ulan Bator. Nature and Tourism, Ulan Bator 9. Lkhagvadorj, D., Hauck, M., Dulamsuren, 4. Dulamsuren, C., Hauck, M., and C., and Tsogtbaatar, J. (2013). Pastoral Leuschner, C. (2010b). Recent Drought Nomadism in the Forest-Steppe of the Stress Leads to Growth Reductions in Mongolian Altai Under a Changing Larix sibirica in the Western Khentey, Economy and a Warming Climate. Journal Mongolia. Global Change Biology 16: of Arid Environments 88: 82-89 3024–3035. 10. Nandintsetseg, B., Greene, J.S., and 5. Dulamsuren, C., Hauck, M., Khishigjargal, Goulden, C. E. (2007). Trends in Extreme M., Leuschner, H. H., and Leuschner, Daily Precipitation and Temperature Near C. (2010a). Diverging Climate Trends Lake Hövsgöl, Mongolia. International in Mongolian Taiga Forests Influence Journal of Climatology 27: 341-347. Growth and Regeneration of Larix sibirica. 11. Okayasu, T., Muto, M., Jamsran, U., SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 39

and Takeuchi, K. (2007). Spatially and Maekawa, A. (eds.), The Mongolian Heterogeneous Impacts on Rangeland Ecosystem Network: Environmental after Social System Change in Mongolia. Issues under Climate and Social Changes. Land Degradation and Development 18: Springer, Tokyo, pp. 269-294 555-566. 14. Tachiiri, K., Shinoda, M., Klinkenberg, 12. Sankey, T. T., Montagne, C., Graumlich, B., and Morinaga, Y. (2008). Assessing L., Lawrence, R., and Nielsen, J. (2006). Mongolian Snow Disaster Risk using Lower Forest-Grassland Ecotones and Livestock and Satellite Data. Journal of 20th Century Livestock Herbivory Effects Arid Environments 72: 2251-2263. in Northern Mongolia. Forest Ecology and 15. Wesche, K., Ronnenberg, K., Retzer, Management 233: 36-44 V., and Miehe, G. (2010). Effects of 13. Suzuki, Y. (2013). Conflict between Large Herbivore Exclusion on Southern mining development and nomadism in Mongolian Desert Steppes. Acta Mongolia. In Yamamura, N., Fujita, N., Oecologica 36: 234-241. 40 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

DOES WATER RIGHTS TRADING PROMOTE ECONOMIC EFFICIENCY OF WATER RESOURCE? : A GLOBAL LITERATURE REVIEW

Chunmei Zhang Department of Economics and management, Inner Mongolia Agricultural University, Hohhot, China.

Abstract: Intense competition of different increasing industrial water demand highlight the water shortage a big issue threatening the sustainable development of the acrid and semi-acrid regions all over the world. Water rights trading or tradable water market is seen as an important way to promote economic efficiency of water resource, and finally to ease water shortage. Especially, agricultural water rights trading1, the main part of water rights trading, is seen by academia as a critical way to promote water utilization efficiency and allocation efficiency. However, the global water rights trading practices reflect that the actual performance of water rights trading is far below the optimistic expectation by the academia. In order to find these reasons of the gap between theoretical expectation and the actual practice, global literatures on water rights trading are summarized into 6 kinds in this thesis to find out its research gaps for further research. These literatures are as followings: (1) the principle of water rights trading; (2) the simulation of potential benefits of water rights trading in developing countries; (3) the ideal and practical water rights trading patterns in developing countries;(4) assessment of the global water rights trading markets’ performance;(5) the prerequisite of water rights trading and lessons from actual water trading market;(6) the institutional reform in water rights trading. Answers about whether water rights trading can promote economic efficiency of water resource are discussed in the paper, they are as followings: (1) water rights trading can promote the utilization and allocation efficiency of water resource by microeconomic theoretical deduction and model simulation; (2) it really promotes the utilization and allocation efficiency of water resource in the relative mature market in America and Australia by the assessment of the performance of their markets; and conclusions are controversial when immature market are considered in developing countries since there are not sufficient data to verify; (3) scholars highlight that transaction cost is the most critical factor constraining the effectiveness of water rights trading markets, which leads to market failure in the economic language; (4) central and local governments play the most critical role to eliminate water rights trading market failure, thus government behaviors and institutional reform are key determinants of the effectiveness of water rights trading markets. It is obvious that current academic research does not explore deep enough about the water rights trading mechanism and thus cannot provide deep insights and absolute evidence to show water rights trading indeed promote the economic efficiency of water resource. Shortcomings of current research are summarized by literature review, and they are: (1) lack of multi-angle theoretical perspective; (2) lack of applied theories; (3) lack of robust evidence; (4) lack of exploration of government’s behavior and dynamics of institutional reform. Future research topics should be broadened and deeply explored are: (1) broaden the theoretical horizons; (2) put the theories down to the earth; (3) carry out robust positive research; (4) explore deeply about government’s behavior mechanism in water management and water rights trading market cultivation.

Key words: agricultural water rights trading market; water resource; economic efficiency; literature review

1 Based on current global literatures and economic principle, water rights trading happens from low-value use to high-value use, currently, irritation use is low valued compared to non-agricultural use, but irrigation water have to be secured because of its attribution to food safety, thus, saved irrigation water from low-value agricultural pro- duction to high-value agricultural production or to non-agricultural use is the nature of water rights trading market, namely, the current water rightss trading market is the agricultural water rights trading market. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 41

Recently, lasting increase in industrial water The question whether water rights trading can demand leads to fierce competition among different promote economic efficiency of water resource is water resource use, and this is seen as the fact of put on the center of the table in this paper, and 6 global water shortage especially in acrid and semi- different topics are summarized to find out different acrid regions (Bekchanov M, Bhaduri A, Ringler degree answers for this academic question. 6 main C.,2013). Promoting utilization and allocation topics summarized from current literatures are as efficiency of water resource is the inevitable choice followings: (1) the principle of water rights trading, faced with the increasing demand. Water rights which give the theoretical support to answer the trading is seen as market-based tool to promote question; (2)the simulation of potential benefits of the economic efficiency of water resource(M.W. water rights trading in developing countries, which Rosegrant, H.P. Binswanger, 1994; Yahua give the simulation support to answer the question; Wang, 2002, X. Diao, T. Roe, R. Doukkali,2005; (3)the ideal and practical water rights trading Qupei Ma,2007;Harou J J, Pulido-Velazquez M, patterns in developing countries, which are the Rosenberg D E, et al.; 2009). Agricultural water ideal path or practical path to achieve the goal of rights trading almost exclusively stands for water efficient water rights trading ;(4) assessment of the rights trading because more than 70% of the total global water rights trading markets’ performance, water demand is used as irrigation water, irrigation which provide evidence to verify the effectiveness water utilization efficiency is very low and irrigation of water rights trading;(5) the prerequisite of can only create out low value-added agricultural water rights trading working and lessons from products, thus there is big room and economic actual water trading markets, which explore the incentive to promote irrigation water utilization limiting factors that influence the effectiveness efficiency and transfer the saved agricultural water of water rights trading;(6)the institutional reform rights to produce high value-added non-agricultural and change in water rights trading, which explore products(Xueyuan Wang,2008; Ziyao Xu,2017). In the institutional arrangements underpin the water practice, water rights trading happened in United rights trading. By classification and summarization States, Australia, and then they are put down to of these literatures, answers of the question are earth in some developing countries such as Chile, become clear and some fresh topics are suggested Mexico in the 1970s. In China, it starts to work to further explored for Chinese scholars. in some north-western provinces and autonomous regions due to their acrid climate characteristic and 1. The principle of water rights trading thus water resource shortage, and in some south- Proponents argue that water rights trading can eastern provinces due to their great water demand. promote economic efficiency of water resource, Globally, water rights trading goes two way, one and thus can improve social welfare. They think is from low value-added agricultural production that water rights can be seen as regular economic to high value-added ones, the other is from the goods to trade in the market since water shortage general low value-added agricultural production bring the economic attribute of water resource to high value-added non agricultural production. to the fore. The mechanism how water rights It works relatively well only in United States, trading can promote economic efficiency of water Australia, and some other few developed countries, resource are proved by market mechanism (World and its performance is far low away from their bank, 1993; Henning Bjornlund, 2002). Firstly, optimistic theoretical expectation in almost every water rights trading under the clear definition of developing country, even in Chile which is seen as water rights can promote the utilization efficiency a good example of water rights trading by World of water resource. Water rights trading leads to Bank. Faced with the huge gap between theoretical the marketed-based pricing mechanism and it expectation and the actual practice, scholars by exclude the government pricing by nature, which now have not yet definitely answered the question will economically stimulate users decrease their whether water rights trading can promote economic demand, and give incentive for suppliers to invest efficiency of water resource and the pursue of the water saving infrastructures to save more and sell answer is still on the way for the scholars. more. Secondly, water rights trading under the clear 42 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 definition of water rights can promote the allocation too low to be profitable for private investors(Bauer efficiency of water resource. With the high efficient C. J., 1997); (5) the absolute clear definition of use of irrigation water, water rights from the saved water rights is impossible, water rights system by irrigation water rights can be transferred from low nature is public water rights institution, thus water value-added agricultural products to high value- use in many cases is collective action which needs added agricultural products, from farmers with government’s regulation; (6) the profitability of low utilization efficiency to high ones, and from selling water rights may stimulate farmers to leave lands with bad quality to high ones (Mccann L., away from farming and thus threaten food safety, Garrick D., 2014); these transfer can improve the government have to keep an eye on the stable effective use of labor and land, and finally increase supply of food production(Jin Mian Han, 2009). output and farmer’s income. Water rights can also be transferred from agriculture to non-agriculture 2. The simulation of potential benefit use, especially to industry use, and this can increase from water rights trading in developing farmer’s revenue from selling water rights and countries promote non-agricultural economic growth, and These successful water rights trading practices finally promote agricultural economic growth in United States and Austrian mould economists’ indirectly (Bauer C. J., 1997). Thus the reallocation and policymakers’ optimistic expectation ,and they, of water resource can make a positive feedback especially under the help of World Bank, put water between water resource utilization efficiency and rights trading down to earth in some developing allocation efficiency. Advocators of water rights countries such as Chile. In order to promote the trading suggest the establishment of tradable rational development of water rights trading, water institution and argue that governments have economists simulate these potential benefits each to regulate the market and carry out trading rules developing country could get mainly using CGE rather than direct control. model(M.W. Rosegrant, H.P. Binswanger, 1994, X. Opponents argue that tradable water market Diao, T. Roe, R. Doukkali, 2005) and mathematical only play a subsidiary role and government still planning model(A. Garrido, 2000). According to play the main role when water governance is these models, water resource is seen as a factor of concerned due to widely market failure happened production to help water traders achieve their utility in the tradable water market (Young M., 1997). maximization goal or profit maximization goal. By These reasons of market failures are as followings: resolving the maximization problem, the market (1) water resource is public good by its nature, price, equilibrium trading quantity, and welfare gain and there is huge and wide externality when from water rights trading can be calculated out. All water is produced or consumed and it cannot these simulations show that there are huge potential automatically internalized into consumers’ and benefits getting from water rights trading within producers’ behaviors , thus governance is necessary irrigation or between agriculture and industry(X. (Howe C.W., 1986, 1986); (2) there are different Diao, T. Roe, R. Doukkali, 2005, A. Garrido. shareholders with different water resources usage 2000; C.K.Seung, T.R. Harris. 2000, M. Müller, aim ,thus it require government to balance their 2006, T. Roe, A. Dinar, Y .Tsur, X. Diao, 2005). relations, especially, water rights trading might However, the rigid assumption of zero transaction threaten the poor’s welfare which need governments cost and completely competition make simulation regulation; (3) water rights trading is sensitive to conclusions less convinced. transaction cost, high transaction cost lower the Chinese scholars follow the above paradigm possibility of water rights trading, and government to simulate the potential benefits of water rights play the critical role in lowering transaction cost; trading if it happens in the Yellow river which (4) investment in water infrastructures needs large stands for the highest level of Chinese water rights fixed cost and long time to recover the total cost, thus reform, from upstream to its downstream, within it is natural monopoly which need regulation, and one province or autonomous region to among mostly governments build up these infrastructures provinces or autonomous regions (Heaney, 2006; using national tax since irrigation water price is Li Zhen Wang, 2015). Two analysis frameworks SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 43 are chosen by Chinese scholars. One follows opening of water rights trading, water rights is just the total benefit or profit maximization process seen as ownership possessed by the whole national (Heaney, 2006). Scholars take some water rights people, and the right of use based on the national trading typical cities or areas as examples to show ownership can be entitled to individual users by that there are tremendous gains will be picked by government. In the very first infancy of water rights water rights trading. The other follows the total cost trading, water rights become a bundle of rights to minimization process. They show that water rights meet the needs of trading, but by now, it still has no trading, instead of directly building up water-saving real right for usufruct which can be totally defined infrastructures, can achieve the water-saving goal at clearly and completely transferred(Manhong Shen, a much lower cost. Moreover, they shows that cost 2002, 2004, Yuanyuan Sun, 2016). Some scholars saving happens only if water transaction cost is low argue that water rights are completely defined if enough to make the benefits of water rights trading they are exclusive, transferable, clearly divided, and notable, and this is difficult for farm-level irrigation they are exercised, saved, and bounded (Yunkun water rights trading, and their policy suggestion is Chang, 2001, Xisheng Huang, 2005, Liping Pei, to lower transaction cost(Yahuawang,2011). 2007). Such water rights are well qualified to be tradable in the market. 3. The ideal water rights trading system The ideal water rights trading market is the assumption and the practical pattern blueprint created out by Chinese scholars. And they choice in developing countries sum up water rights markets into “two levels” and There is no huge difference in pattern choice “three patterns”. Initial water rights allocation and between ideal water rights trading system and reallocation of water rights are two levels in water the practical ones in developed countries and in rights market. There are trading among regions, Latin-American developing countries, the former among different industries, and among farmers as far can relatively easy put ideal water rights trading as reallocation of water rights market is concerned system down to earth because it has long history and this is so-called “three patterns”. The initial of mature market system so that they are relatively water rights means a bundle of water rightss based experienced to cultivate water rights trading system on the right of use. The principle dominates initial and their citizens are relatively easy to accept water rights allocation is that equity is preferred to seeing water rights as proprietary right to trade, efficiency. and it is better achieved by government the latter actually almost directly copy the former’s allocation rather than market allocation (Lili Rong, water rights trading pattern since they ideologically 2007). National government gives top priority to accept the economic liberalism theory. As far as water rights for living, then water rights is given for China is concerned, ideal patterns are different ecological use, agricultural use and other industrial from actual ones, since the ideal one are learned use. Agricultural water rights surplus, other water from suggestions rooted in western new-liberalism rights for industrial use, and unallocated water rights economics while actual ones are chosen under the can be transferred from each other only if they abide constraint of Chinese geographical and institutional by relevant laws and regulation(Jiajun Li, 2012). context. Chinese scholars focus on three types of Demanders are local governments, non-agricultural topics: the definition of water rights, the explorations individual users, irrigation farmers, suppliers of ideal pattern, and the exploration of practical are non-agricultural individual users, irrigation ones under the national level and provincial level farmers. Price is determined by government in the constraint of institutional and geographical context. markets’ infancy, and then is determined by market These three topics are detailed introduced as below. itself. The main role of government in the water The clear definition of water rights is the rights trading system is to regulation and deal with prerequisite of water rights trading. When it requires market failure (Jinmian Han, 2008). Water rights that water resource has to be seen as commodity to trading could happen within agriculture, between trade since water resource is becoming more and agriculture and non-agriculture sectors, and from more scare, Chinese scholars give the deeper and individual users to governments(Liping Pei, 2007, more concrete definition of water rights. Before the Lili Rong, 2010). 44 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

In reality, water rights trading pattern is (net benefit from water rights trading) is that the strongly affected by Chinese national context. market value of buyers’ payment minus the market Firstly, citizens are reluctant to treat water resource value of supplier getting, and then minus all other as regular commodity to pay more in the long different transaction costs (Bekchanov M.,2013). public water rights institutional history with great According to the calculation, there are positive net subsidy for their water expense expenditure. benefits in United States and Austrian, thus water Secondly, local governments have not enough rights trading really promote water resources’ incentive to carry out water rights trading plan economic efficiency (Hearne R.R., Easter ; K.W. since it is costly while trading benefit is long-run 1997; Henning Bjornlund; 2003; Settre C., and not clear, although central government would Wheeler S. A., 2016). There are arguable opinions prefer to water rights trading to achieve the efficient when the performance of water rights trading in use of water resource. Thus the ideal cultivation of developing countries is concerned. Here Chile is water rights markets needs far way to go. There taken as a typical example since its water rights are three characteristics of current water rights trading market it the most mature in all developing trading under the above constraints. Firstly, water countries. World Bank hold that there are active rights is not the completely tradable ones but the water rights trading and positive net benefit from right of use in limited period of time. Secondly, trading, while some local scholars hold that water local governments not only make trading rules but rights trading market is much less active than also act as the supplier in the trading, thus current theoretical expectation, and there is not robust water rights trading is quasi- market trading, it is evidence to verify water markets’ performance. not the free market between supplier and demander Chinese scholars use qualitative methods and case with equal legal status(Liping Pei, 2007). Although studies in some experimental areas in north western there are some limited number of trading happened provinces to show its performance, however they among irrigation farmers in the north-western cannot firmly prove that water rights trading provinces and autonomous regions, there is still no market promote the economic efficiency of water complete system of two-lever and three-type water resources(Xiao you Sheng, 2007; Liange Zhao, rights trading market in China. 2007; Jinmian Han, 2009; Jianbin Zhang, 2014; Zhi Cai, 2015; Tengfei Shi, 2015; Min Liu; 2016; 4. The assessment of water rights trading Based on water rights trading happened all over the market’s performance and efficiency world, the only one qualitative global assessment Evaluation of water rights trading market’s of water markets’ performance by now is done performance tries to provide evidence that trading (Grafton, 2010), 19 indexes from three dimensions really achieve the economic efficiency of water of institution base, economic performance, and resource. Since it is well developed in United States, environmental sustainability are used to evaluate Austrian, and Chile, the quantitative assessments the market performance of United States, Austrian, are done in these countries. The key index to assess Chile, South Africa, and China. its conclusion is is the maximum net benefit from trading. Scholars that United States and Austrian rank first, followed take all agents in water trading into consideration; by Chile and South Africa, and China is at its very they calculate the surplus between all total benefits early infancy. each agent can get and all costs of trading. As far as trading benefits are considered, water resource is 5. Prerequisites of and lessons from water seen as factor of production to produce agricultural rights trading market output for farmers involved in water trading, thus Scholars rethink the effectiveness of water farmers’ benefits getting from water resource use rights trading market and focus on learning from can be initially shown by the value of marginal experiences and lessons why water rights trading product (VMP is the demand curve of farmer to has not improved efficiency since it performs far the water resource), the bought quantity of water below the optimistic anticipation(J.J. Pigram; rights multiplied by the water rights price are the 1993; R.E.Howitt; 1994; K.W. Easter; 1998). market value of buyer’s payment. The net welfare Basically, they realizes that a effective water SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 45 rights trading market is strongly embedded in a on transaction costs in water rights trading is wider institutional and historical context, which still at its early infancy, scholars only give its require co-working of market and government, and definition, qualitatively explain how it constricts thus government is faced with the new challenge water rights trading, quantitatively calculate its in the trend of decentralized water governance, percentage compared to trading price, find factors government have to focus on the cultivation of influencing transaction costs. Some scholars hold incentive system to stimulate traders participate in that transaction costs is all costs happened before, the water rights trading, and turn to regulation other during, and after trading, it generally include than direct control. When they think back about the cost of building up and maintaining water reasons why water rights trading are effective in infrastructure, the cost of finding out traders, the developed countries, they find the basic dynamic cost of defining the complete attributes of water of co-working of government and market. With rights for trading, the cost of bargaining on price the rapid increase in different water demand, users and other trading conditions, and the law cost prefer to see water resource as regular commodity, (Colby B. G.; 1990; Robert R. Hearne; 1997; Bauer and it is can be allocated by market to resolve the C. J.; 1997). Some scholars define transaction cost fierce competition among different uses, thus there as institutional costs(McCann L., Garrick D.,2014), is strong incentive for water resources users to trade including the cost of building-up, maintaining, water rights. Meanwhile, it is more and more costly using, and changing institutions relevant to water to build up water infrastructures and to centrally rights trading. Transaction costs can make water manage water resources for governments, thus rights trading less possible to happen and it make governments also want to loosen their rigid control the price discreteness worsen which make the price of water management, help cultivate water market less effective as trading signal. Factors influencing to save their budget. Finally, the co-working of transaction cost are comprehensively summarized government loosening control and market trading in the work of Water Market in the 21th Century. together put water rights trading market down to the earth. The successful experiences are summarized 6. Water rights trading institution reform in the work of American Water Market finished It is much easier to put water rights trading by World Bank(Simpson L., Ringskog K.; 1997), system down to earth in developed countries in which 8 prerequisites are mentioned: (1) huge since there is long history of mature market increase in water demand and fierce competition working system which have already accumulated among different usages; (2) clear definition and experiences for water rights trading and have equal allocation of initial water rights bundles; (3) cultured citizen’s consciousness of accepting water well-equipped water infrastructure to transfer water rights as a regular commodity to trade, while it resource; (4) high efficient water administration is mainly dependent on government, especially system; (5) the mechanism of dispute mediation; central government, to initiate the systematic water (6) dealing with the third party effect; (7) nurturing rights trading institutional reform to put water rights of the citizens’ consciousness of regarding water trading down to earth in each developing country. resource and rights as commodity; (8) stable and Thus, institution changes, including mandatory abundant budget. ones and induced ones, should be well discussed Market failure in the water rights trading by scholars in developing countries. The fact is that market is analyzed by scholars. Reasons of market scholars in Latin-American developing countries failure in the water rights trading market includes such as Chile do not focus much on the role of transaction costs, externality, turn flow, market institution, the possible reason may be that Latin- power, trading risk and uncertainty, among which American developing countries almost copy the transaction costs is strongly emphasized by water rights trading pattern already well-performed scholars (R.R. Hearne, K.W. Easter; 1997; B.G. in United States, and there is no big innovation in Colby; 1990; J.E. Nickum, K.W. Easter; 1991, water rights trading institution. However, Chinese Easter, K.W.; Rosegrant, M.W.; Dinar, A., 1999; scholars attach more importance on the role of Mccann L, Garrick D., 2014). However, research water rights trading institution change dominated 46 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 by different levels of governments than scholars determine its right bundle regulation structure, in other developing countries, since China has under the right bundle structure, water rights trading long history of public water rights institution and behavior and thus water structure are determined, the cultivation of water rights trading system is a and then market performance or institutional total new creation process, thus the whole build- performance of market mechanism is determined, up of water rights trading market is the supply the institutional performance conversely influence of the new institutional system, and this public market behavior which call for the improvement goods is definitely supplied by central government. in the right bundle entitled structure to satisfy the Meanwhile, local governments are reluctant to efficient allocation by market mechanism. Guoxing lose their controlling power on water resource Xiao(2004)argues for the complete tradable initial management. Thus the dynamics of government’s water rights allocation which gives the individual behavior and the institutional change initiated by water users definite Usufructuary Right to equally government are two topics discussed by Chinese trade with others, and he believes that the equal scholars. right is the prerequisite of free market trading, and Chinese scholars’ researches mainly focus free market trading means price is determined by on two aspects. Firstly, they discuss the role of market which will be much higher than current ones government and market and their relations in the controlled and strongly subsided by government, water rights trading market. The consensus is water and private suppliers will invest in building up rights trading market is complicated, Chinese water infrastructure and water saving technology scholars have not deeply understood the water driven by the high price and possible profit, thus, trading market mechanism, and their attitudes to he strongly argue for the improvement in initial water rights trading market are cautious, thus they water rights allocation. Qupei, Ma(2007) hold that argue that currently government should still play its bad definition of initial water rights allocation and dominant role on water rights market cultivation, the lack of appropriate organization involved in the even directly take part in trading as market entity management in irrigation water resource are two to achieve equity and efficiency (Shucheng key reasons for the low efficient allocation of rural Wang,2000; Angang Hu,2001;Yahua Wang, 2017). water resources. Because of the high transaction Under this guideline, current rational pattern of cost, it is quite difficult to clearly define the initial trading is quasi-market in which local government water rights, and some rent of unallocated initial instead of individual farmers or their associations water rights will definitely leave in the public sell saved irrigation water to industrial firms or area and finally disappear, and the appropriate to other cities. Their arguments well support organization to capture this rent is a key method to and explain the current quasi-market pattern, improve the economic efficiency of water resource. nevertheless, they are far from the ideal design, He gives a empirical research in Zhangzhou Chinese scholars still believe the decentralized irrigation district in Hubei province which verify water management and cultivation of water rights his hypothesis. Rui Ye, 2012, compare the relative trading market, they strongly call for the reform cost of clear definition of water rights and the cost carried out by central government, yet there are of government control during the whole trading no enough deep applied theories which can help process, and he thinks the clear definition of water ideal design down to earth, and the lack of water rights under the technological and budget constraint rights trading practices constraint scholars further cost too much, thus government choose the less theoretical research. expensive way to improve economic efficiency of Secondly, they give a theoretical explanation water resource, in which government only directly from the perspective of institutional economics to sell saved irrigation water to firms, other than show the whole picture of water rights trading market allocate initial water rights to farmers and let them and its future possible choice. Chinese scholars use trade. SCP paradigm widely used in industrial economics for reference to put forward the hypothesis that the complicated trading attributes of water resource SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 47

7. Literature Review and future research convinced when the situation of developed topics countries are concerned, and they only can give Global scholars attach high importance on some case studies in most developing countries the positive effect of water rights trading market where water rights trading market exists and cannot in improving the economic efficiency of water achieve consensus about the effectiveness of resource to resolve the water shortage threatening water rights trading market, but scholars come to the sustainable development in acrid and semi- consensus that water rights trading market are still acrid areas all over the world. However they by in their infancy, especially in developing countries, now have not deeply understood how water rights and more precise and effective institutional and trading market works due to the very immateriality policy improvement should be carried out in both of water market practices all over the world. And developed and developing countries. the water rights trading markets which are strongly The third gap is there is no clear analysis about decided by government reform has not been well the role of interacted stakeholders in the water rights implemented since governments are cautious when trading market, especially the interaction between they do not get firm support of applied theories. governments and other stakeholders. The formal The strong positive feedback between applied water trading practice only started 50 years ago, and theories and trading practices has not established by water rights trading based on the private water rights now which shows the big gap between optimistic system is a small fraction of the total water rights use, theoretical expectation and less satisfactory thus water rights system has always been dominated practical performance, and possible improvement by public water rights institution; governments are for future research can be summarized. and will be the chief actor in supplying, managing, The first gap is that there are no enough and regulating of water resource, and they possess applied theories to further boost the practices of administrative discretion which give them stronger water rights trading. The theoretical research of power over the usage rights entitled to farmers and water rights trading mechanism is for the resolution other rights owned by other agents, meanwhile, of competing use of water resource due to water they are reluctant to give up their power over the shortage, which decides its nature is the applied control of water resource; Therefore, academic theory. Although researchers logically deduce that focus should be put on the role of governments and water rights trading market can improve economic explore their goal functions and their behaviors. efficiency of water resource, and simulates the huge Currently, scholars’ research emphasize farmers’ potential benefits of water rights trading can obtain, behavior more than governments’ behavior; one they have not found the appropriate way to put water possible reason is that it is difficult to get data to rights trading market down to earth, especially explore governments’ behavior, but more academic the ones most suitable to local geographical and research about government should be furthered in institutional context since water rights trading the future. market are strongly embedded in the local context. The last-but-not-least gap is that there is no Scholars should struggle to find factors constraining flexible, comprehensive and multi-angle research water rights trading, and explain how they limit on the behavior of water users and governors. water rights trading and how to break them. Although scholars point out that scare resource The second gap is that there are no robust allocation theory, natural monopoly theory, public empirical studies to verify or disprove the goods theory, property right theory, externality effectiveness of water rights trading market, neither theory, transaction cost theory, collective action deep understanding about water rights trading theory should be used in the analysis of interactions mechanism. Scholars only can collect enough data of stakeholders, the reason of market failure and in developed countries mainly in western America government failure; comprehensive and flexible and Austrian, while they cannot collect enough researches are still rare and they are deserved to be data in developing countries due to inactive market further explored in the future. trading, thus researchers only make their judgment of water rights trading market’s effectiveness 48 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

REFERENCES: 12. Howe C. W., Schurmeier D. R., Jr. W. 1. Bekchanov M, Bhaduri A, Ringler C. D. S. Innovative Approaches to Water How Market-Based Water Allocation Can Allocation: The Potential for Water Improve Water Use Efficiency in the Aral Markets [J]. Water Resources Research, Sea Basin?[J]. Social Science Electronic 1986, 22(4):439-445. Publishing, 2013, 11(11):1501-4. 13. Jinmian Han. The third effect of water 2. Harou J J, Pulido-Velazquez M, Rosenberg rightss trading [D]. Northwest University, D E, et al. Hydro-economic models: 2009. Concepts, design, applications, and future 14. ROSEGRANT M.W; BINSWANGER prospects [J]. Journal of Hydrology, 2009, H P. Markets in tradable water rightss: 375(3):627-643. potential for efficiency gains in developing 3. Ya hua Wang. Water rightss and water country water resource allocation [J]. market: new trend in water management World development; 1994; 22( 11) : 1613 [J] Review of Economic Research. -1625. 2002,(20):2-8. 15. X Diao, T Roe, R Doukkali. Economy- 4. Qupei Ma. The economic analysis of wide gains from decentralized water agricultural water resource efficient allocation in a spatially heterogenous allocation. [D].Huazhong Agricultural agricultural economy.[J].Environment University, 2007. and Development, 2005 5. Xueyuan Wang, Hongyun Han. 16. GARRIDO A.A mathematical Prerequisites and their influencing factors programming model applied to the study of agricultural water rights trading: a of water markets within the Spanish foreign literature review [J]. Journal of agricultural sector[J].Annals of operations China University of Geosciences (Social research; 2000; 94( 1) : 105 - 123. Sciences Edition) 2008(02):66-71. Economy-wide gains from decentralized 6. Zi yao Xu, Yan Wang, Yunjie Liu et al. water allocation in a spatially heterogenous The framework of agricultural water agricultural economy rightss trading markets and case studies of 17. C.K. Seung, TR Harris, JE Englin, NR market trading. [J] Journal of Economics NetusilImpacts of water reallocation: A of Water Resources.2017, 35(4):38-45. combined computable general equilibrium 7. World Bank (1993), ‘Water Resources and recreation demand model approach.[J]. Management’, A World Bank Policy The Annals of Regional ScienceDecember Paper,Washington DC. 2000, Volume 34, Issue 4, pp 473–487 8. Henning Bjornlund. Efficient water 18. M. Müller, A general equilibrium approach market mechanisms to cope with water to modeling water and land use reforms in scarcity[J]. International Journal of Water Uzbekistan, .[D].2006 Resources Development, 2003, 19(4):553- 19. T. Roe, A Dinar, Y Tsur, X Diao Feedback 567. links between economy-wide and 9. Mccann L, Garrick D. Transaction Costs farm-level policies: with application to and Policy Design for Water Markets[M]// irrigation water management in Morocco Water Markets for the 21st Century. .[J]. Journal of Policy Modeling, 2005 Springer Netherlands, 2014:11-34. 20. Lizzhen Wang, Yuefei Huang, Guangqian 10. Bauer C J. Bringing water markets down Wang, and Jianshi Zhao. The modeling of to earth: The political economy of water water rightss market trading in the city of rightss in Chile, 1976–1995[J]. World Bayannaoer[J]. Journal of Hydroelectric Development, 1997, 25(5):639-656. Engineering. 2015,34(06):81-87. 11. Young M. Water rightss: An Ecological 21. Hearne R R, Easter K W. The economic Economics Perspective[J]. Working and financial gains from water markets Papers in Ecological Economics, 1997. in Chile[J]. Agricultural Economics of SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 49

Agricultural Economists, 1997, 15(3):187- 2016: 67-91. 199. 34. GRAFTON R Q; LANDRY C; LIBECAP 22. Wang Y. A simulation of water markets G D; et al. An integrated assessment of with transaction costs[J]. Agricultural water markets: Australia; Chile; China; Water Management, 2012, 103(1):54-61. South Africa and the USA [R]. National 23. Manhong Shen. Research on the water Bureau of Economic Research; 2010. rights trading institution: Chinese case 35. Xiaoyou Sheng. Research of farmers’ studies[D]Zhejiang University, 2004. rights protection in the water rightss 24. Manhong Shen. The initial regional trading. [D]. Chinese Academy of water rightss allocation: taking the equal Agricultural Sciences , 2007. division of initial water rightss allocation 36. Liange Zhao, Congshu Hu. The economic in Heihe as an example [J]. Research of effect of Dongyang-Yiwu water rightss Institutional Economics,2004,(03):64-80. trading. [J]. Issues in Agricultural 25. Yuanyuan Sun, Shaofeng Jia. Water Economy, 2007, 28(4):47-54. rightss entitlement basis and classification 37. Jianbin Zhang. Positive effects of water of water rightss [J]. Resource Science, rights trading: theoretical analysis and 2016, 38(10):1893-1900. empirical studies. [J]. Rural Economy, 26. Yunkun Chang. Cutting off of Yellow 2014(3):107-111. River and the research of its water rightss 38. Zhi Cai. The influences of water institution institution [M]. China Social Sciences reform on the agricultural structure Press, 2001. in YongChang County. [D].Lanzhou 27. Xisheng Huang. Research of Chinese University,2015. water rightss institution [M]. Sciences 39. Tengfei Shi. The connection between Press, 2005. irrigation water rightss trading and 28. Liping Pei. Research of tradable water farmer’s interests. [J]. Chongqing Social rightss. [J]. Law Review, 2007(4):44-54. Science, 2015(1):15-20. 29. Lili Rong. Research of the quality of water 40. Min Liu. “quasi-market” and regional rightss and economic efficiency of water water resource management: the resource [D]. Shandong Agricultural sociological analysis of water rights University, 2010. trading in Qingshui District in Inner 30. Jiajun Liu. Research of Chinese Mongolia. [J]Issues of Agricultural water rightss institution. [D].Wuhan Economics,2016,37(10):41-50+110-111. University,2014. 41. J.J .Pigram, Property rights and water 31. Jinmian Han et al. Symbiosis and markets in Australia: An evolutionary transition: the framework and its working process toward institutional reform.[J] of Chinese water market [J]China Water Resources Research, 1993 Population Resources and Environment, 42. R.E. Howitt Empirical analysis of water 2008(05):161-167. market institutions: The 1991 California 32. Hearne R R, Easter K W. The economic water market.[J]Resource and Energy and financial gains from water markets Economics, 1994 in Chile[J]. Agricultural Economics of 43. Easter, K.W.; Rosegrant, M.W.; Dinar, Agricultural Economists, 1997, 15(3):187- A., 1999: Formal and informal markets 199. for water: institutions, performance, 33. Setter C; Wheeler S A.Environmental and constraints. World Bank Research water governance in the Murray-Darling Observer 14(1): 99-116 Basin of Australia: the movement from 44. Simpson L; Ringskog K. Water markets regulation and engineering to economic- in the Americas[M].World Bank based instruments [C] //Handbook of Publications; 1997. environmental & sustainable finance. 45. Colby B G. Transactions Costs and 50 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Efficiency in Western Water Allocation[J]. rightss in Chile, 1976–1995[J]. World American Journal of Agricultural Development, 1997, 25(5):639-656. Economics, 1990, 72(5):1184-1192. 52. Angang Hu and Yahua Wang. Public 46. NICKUM J E; EASTER K W. The policies of water resource allocation in the application of transaction cost economics economical transformation: quasi-market to Asian-Pacific metropolitan water-use and political democratic consultation [J]. issues [J].Regional development dialogue; China Soft Science, 2000,(05):5-11. 1991; 12( 4) : 3 - 15; 53. Yahua Wang, Quanfeng Shu et al. 47. Easter, K.W.; Rosegrant, M.W.; Dinar, Literature Review of water market A., 1999: Formal and informal markets and research prospect water market for water: institutions, performance, with Chinese characteristics. [J].China and constraints. World Bank Research Population, Resources and Environment, Observer 14(1): 99-116 2017, 27 (06):87-100. 48. Mccann L, Garrick D. Transaction Costs 54. Shucheng Wang. Water rightss and water and Policy Design for Water Markets[M]// market: economic tools of high efficient Water Markets for the 21st Century. allocation of water resources. [J]Chinese Springer Netherlands, 2014:11-34. Water Resource, 2000,(11):6-9. 49. Colby B G. Transactions Costs and 55. Guoxing Xiao. Chinese water rightss Efficiency in Western Water Allocation[J]. trading and its institutional reform [J]. American Journal of Agricultural Management World. 2004(4):51-60. Economics, 1990, 72(5):1184-1192. 56. Qupei Ma. The efficient allocation of 50. Hearne R R, Easter K W. The economic agricultural water resource [D].Huazhong and financial gains from water markets Agricultural University, 2007. in Chile[J]. Agricultural Economics of 57. Rui Ye. The research of water resource Agricultural Economists, 1997, 15(3):187- reallocation [D]. Northwest University, 199. 2012. 51. Bauer C J. Bringing water markets down to earth: The political economy of water SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 51

POTENTIAL AND OPTIONS FOR INCREASING DOMESTIC SUPPLY AND USE OF LIVESTOCK FODDER

Erdenebolor Baast1, Nyamgerel Bartseren2 and Alfred Kather3 1 PhD, Association for Sustainable Rural Development, [email protected] 2 PhD, Mongolian University of Life Sciences 3 PhD, IAK Agrar Consulting GmbH, Leipzig

Abstract Mongolia’s market for livestock fodder is currently MNT 321 billion but its potential capacity at the current number of livestock is MNT 370 billion. The key opportunity for increasing domestic supply lies in the unsatisfied fodder requirements of intensified livestock farms, which could be translated into a potential additional demand for 28 to 41 thousand tons of roughages and 131 to 133.5 thousand tons of concentrates with a combined worth of MNT 47 to 50 billion. In pastoral livestock production, supplementary feeding mainly consists of hay and depends on weather conditions in winter and spring. Based on the trends of recent years feeding amounts per animal are unlikely to increase. Underconsumption rather than undersupply being the main constraint of the fodder market, the priority of national fodder policies needs to shift from boosting production to stimulating consumption. Policies targeting herders also need to discontinue supporting haymaking from already overused pastures. Policy measures urgently recommended by this study include supply of green fodder instead of hay into the emergency fodder reserves, encouraging forage cropping through a public-private partnership scheme, financial support for fodder production by herders and farmers, and provision of advisory services to herders and farmers through local agricultural authorities.

Хураангуй Монгол улсын тэжээлийн зах зээлийн өнөөгийн үнэлгээ нийт 321 тэрбум төгрөг, малын тоо толгойн өнөөгийн төвшинд нийт багтаамж нь 370 орчим тэрбум төгрөг. Тэжээлийн үйлдвэрлэл, нийлүүлэлтийг нэмэгдүүлэх гол боломж нь эрчимжсэн мал аж ахуйн тэжээлийн хэрэглээг нэмэгдүүлэх явдал юм. Хэрэгцээг нь бүрэн хангахад нэмж шаардагдах 28-41 мянган тонн бүдүүн ба шүүст тэжээл, 131-133.5 мянган тонн хүчит тэжээлийн нийт үнэлгээ 47-50 тэрбум төгрөг болно. Бэлчээрийн мал аж ахуйд малын нэмэлт тэжээл нь өвөлжилт, хаваржилтын нөхцлөөс хамаарах бөгөөд үндсэндээ өвсөөр хязгаарлагдаж байна. Сүүлийн жилүүдийн хандлагаас үзэхэд нэг малд ногдох нэмэлт тэжээлийн хэмжээ цаашид нэмэгдэх магадлал бага. Тэжээлийн зах зээлийн хөгжлийг хязгаарлаж буй гол хүчин зүйл нь нийлүүлэлтийн бус харин хэрэглээний дутагдал учраас бодлогын төвшинд тэжээл үйлдвэрлэлийг нэмэгдүүлэхээс илүүтэй тэжээлийн хэрэглээг төлөвшүүлэх, нэмэгдүүлэхэд түлхүү анхаарах шаардлагатай. Түүнчлэн байгалийн хадлан бэлтгэлийг хязгаарлахгүй бол энэ нь бэлчээрийн даац хэтрэлтийг улам ихэсгэж буйг анхаарвал зохино. Судалгааны үр дүнд тулгуурлан бодлого боловсруулагчдад дараахь тодорхой ажлуудыг эн тэргүүнд хэрэгжүүлэхийг зөвлөж байна. Үүнд аймаг, сумдын аюулгүйн нөөцөд өвсний оронд ногоон ба хүчит тэжээл нийлүүлэх, ногоон тэжээлийн тариаланг аймаг, сумдын захиргаа болон малчдын хоршоодын хамтарсан хэлбэрээр хөгжүүлэх, малчид, фермерүүдийн тэжээл бэлтгэх санаачлагад санхүүгийн дэмжлэг үзүүлэх, орон нутгийн захиргааны бүтцэд тулгуурласан ХАА-н нэвтрүүлэх үйлчилгээний тогтолцоо бий болгох зэрэг ажлууд багтана.

Key words: fodder market, fodder cropping, intensified livestock farming, policy analysis Key words: fodder market, fodder cropping, intensified livestock farming, policy analysis KeyIntroduction words: fodder market, fodder cropping, intensifiedquantitative livestock farming,and policyqualitative analysis research methods. Qualitative research involved IntroductionThe livestock sector contributes 84% of the quantitative and qualitative research methods.GAP-analysis Qualitative of nationalresearch fodder involved policies The grosslivestock agricultural sector contributes output, 10% 84% of ofthe the GDP GAP-analysisand semi-structured of national interviewsfodder policies with 88 grossas agriculturalof 2016 output,(NSO, 10% 2017). of the LivestockGDP and personssemi-structured representing interviews the government with 88 and as productionof 2016 is(NSO, dominated 2017). by pastoralismLivestock but personslocal representingauthorities, theresearch government institutions, and productionthere is isan dominated increasing by number pastoralism of intensified but localindustrial authorities, and small-scale research fodderinstitutions, producers, theredairy, is an beef,increasing milk number goat, pigof intensified and chicken industrialfodder and traders, small-scale crop and fodder livestock producers, farms and dairy,farms. beef, milk goat, pig and chicken fodderlivestock traders, herders.crop and livestockQuantitative farms research and farms. A major challenge in the livestock sector is livestockmethods herders. included Quantitative descriptive statistics,research and A majorinsufficient challenge infeeding, the livestock which sector limitsis methodsherd includedmodelling descriptive and fodder statistics, balancing and for insufficientproductivity feeding, and correlates which with overuselimits of herdintensified modelling livestock and fodder farms. balancing for productivitypastures.52 | SCIENTIFIC andMeasured correlates JOURNAL-AGRICULTURAL in withoat-based overuse Fodder of ECONOMICS - 2018 intensifiedHerd models livestock were farms. developed to determine pastures.Unit (FU)Measured per sheep-head in oat-based unit (SHU),Fodder total Herdthe models size andwere structure developed of tothe determine total stock Unitfodder (FU) peruseINTRODUCTION sheep-headdropped from unit 12.6 (SHU), kg in total 1990 to statistics, and herd modelling and fodder balancing the (dairysize and and structurebeef cattle, of pigsthe totaland chickens)stock fodder6.8 usekg dropped in 2016 from (Namjim, 12.6 kg in2004; 1990 toNSO, The livestock sector contributes 84%(dairy ofavailable andfor beef intensifiedat intensifiedcattle, pigslivestock livestockand farms.chickens) farms in 6.8 2017).kg in While2016 improving(Namjim, fodder2004; supplyNSO, and the gross agricultural output, 10% of the GDPavailable asMongolia. at intensified HerdBased models livestock onwere developedtypical farms in toherd determine the 2017).livestock While feedingimproving is a fodderpolicy prioritysupply andthere is of 2016 (NSO, 2017). Livestock productionMongolia. managementis size Basedand patterns, structure on the oftypical themodels total simulatedstockherd (dairy and beef livestockcritical feeding shortage is a policyof research priority thereto inform is dominated by pastoralism but there is an increasingmanagementherd developmentcattle, patterns, pigs and thearound chickens)models 1000 simulated availableproductive at intensified criticalpolicies shortage on theof researchcapacity, todevelopment inform number of intensified dairy, beef, milk goat, herdpig andanimals development livestock in each farmsaround herd in 1000Mongolia.for a productiveperiod Based of on10 typical herd policiespotentials on andthe constraintscapacity, ofdevelopment the market for chicken farms. animalsyears. inmanagement Each each herd herd was patterns,for divideda period the in models ofgroups 10 simulated of herd potentialslivestock and fodder.constraints Recent of the research market forof the years.animals Each thatherd arewas of divided same sex in groupsand age, of thus livestockfodder fodder.A marketmajor Recent challengehas researchbeen in the limitedof livestockthe to sector development around 1000 productive animals in animalssharing that theare sameof same fodder sex requirementsand age, thus and fodderestimationsis insufficientmarket of hastotal feeding, fodderbeen requirementslimited which limitsto in productivity each herd for a period of 10 years. Each herd was sharingfeeding the samerations. fodder The totalrequirements stock of anda herd estimationspastoraland correlates oflivestock total withfodder production overuse requirements (Nyambatof pastures. in and Measured divided in groups of animals that are of same sex feedingequals rations. the sum The of total stocks stock across of aall herd groups pastoralGerelkhuu,in livestockoat-based 2017; production Fodder Togtokhbayar Unit (Nyambat (FU) perandet sheep-headal., and age, thus sharing the same fodder requirements equalswithin the thesum herd. of stocks across all groups Gerelkhuu,2017).unit (SHU),Fodder2017; totalrequirementsTogtokhbayar fodder use of droppedetintensified al., from 12.6 and feeding rations. The total stock of a herd equals within the herd. 2017).livestockkg Fodder in 1990farms, requirements to on6.8 the kg other ofin 2016intensified hand, (Namjim, remain 2004; the sum of stocks across all groups within the herd. livestockunknown. farms, A onrecent the estimationother hand, of remain Gurbazar NSO, 2017). While improving fodder supply and � (1) unknown.et. al A(2017) recent lacksestimation validity of Gurbazaras it only livestock feeding is a policy priority there is critical � (1) (1) et. measuresal shortage(2017) theoflacks researchrequirements validity to inform asof itproductive onlypolicies on the �=��� ���� measuresanimalscapacity, the at requirementsdevelopmentintensified livestock potentialsof productive farms and constraints but ofT = Total number�=� of� animals in the herd animalsleaves at outintensified the requirements livestock farms of breeding but ��� the market for livestock fodder. Recent researchT = ofATotal = Number Tnumber = Total ofof number animalsanimals of in inanimals the a herdspecific in the sexherd leavesanimals out andthe offspring.requirements of breeding the fodder market has been limited to estimationsA =and Number ageA =group ofNumber animals of animalsin a specific in a specific sex sex and age animals and offspring. Thisof totalstudy fodder is a responserequirements of thein pastoralGerman- livestockand iage = groupNumber group of sex and age groups of ThisMongolian studyproduction is acooperation response(Nyambat ofproject theand German-“SustainableGerelkhuu, i2017; = animalsNumber i = Numberof sex ofand sex age and groupsage groups of of animals MongolianAgriculture” cooperation to the projectneed to “Sustainable inform policies Togtokhbayar et al., 2017). Fodder requirementsanimalsThe following equation was used to Agriculture”andof stakeholders intensified to the need livestockwith to empirical inform farms, policies analysis on the of other hand, The following equation was used to determine A: and thestakeholders fodder market with empirical and key analysis interventions of The determinefollowing A: equation was used to remain unknown. A recent estimation of Gurbazar the neededfodder formarket improving and key fodder interventions supply and determine A: et. al (2017) lacks validity as it only measures the (2) 2 neededlivestock for improving feeding. The fodder study supply also fills and a gap requirements of productive animals at intensified (2) livestockin fodder feeding. market The studyresearch also by fills quantifying a gap t = Numerical�� = ���� reference��� � to �� ��any��� given�) month in fodderthelivestock current market farmsfodder research but consumption leaves by quantifyingout the and requirements total of � t = ��� Numerical� reference�� � to any given month t = NumericalX �= Number= � reference ��of animals� to �� any shifted��� given) to month the group the foddercurrentbreeding requirements fodder animals consumption and of offspring.intensified and livestocktotal X = Number of animals shifted to the group from X = fromNumber the lowerof animals age group shifted to the group fodderfarms. requirements This study of isintensified a response livestock of the German- the lower age group from the lower age group farms.Mongolian cooperation project “SustainableY = NumberY = Number of animals of animals shifted shifted from from the the group to Y =group Number to the of higher animals age shifted group from the Agriculture” to the need to inform policies and the higher age group Materialstakeholders and Methodswith empirical analysis of the foddergroupZ =to NumbertheZ = higher Number of age animals ofgroup animals deducted deducted from fromthe the group MaterialThemarket study and and Methodswas key conducted interventions between needed May for and improving Z = groupNumber through ofthrough animals losses, losses, deductedslaughter slaughter fromand and sales the sales The Octoberstudyfodder was supply2017 conducted and and livestockused between a combination feeding. May and The ofstudy group also through losses, slaughter and sales Octoberfills 2017 a gap and in fodderused a marketcombination research ofby quantifying Using the herd sizes and structures determined the current fodder consumption and total fodder we estimated the total fodder requirements and requirements of intensified livestock farms. the current amounts of fodder consumption of intensified livestock farms to establish a fodder MATERIAL AND METHODS balance and measure the potential for increased use The study was conducted between May and of fodder. The measurement unit used in fodder October 2017 and used a combination of quantitative balancing is metabolizable energy (ME), expressed and qualitative research methods. Qualitative in Megajoule (MJ). research involved GAP-analysis of national Results fodder policies and semi-structured interviews Mongolia’s fodder market was MNT 321 with 88 persons representing the government and billion in 2016. Fodder supply totaled 1.4 million local authorities, research institutions, industrial tons. Roughages, mineral fodder and concentrates and small-scale fodder producers, fodder traders, accounted for 75, 21 and 5 percent of the supply, crop and livestock farms and livestock herders. respectively (Table 1). Quantitative research methods included descriptive Domestic fodder production accounts for 97 Using the herd sizes and structures determined we estimated the total fodder requirements and the current amounts of fodder consumption of intensified livestock farms to establish a fodder balance and measure the potential for increased use of fodder. The measurement unit used in fodder balancing is metabolizable energy (ME), expressed in Megajoule (MJ). Results Figure 1. Structure of roughage consumption in 2016, in % Mongolia’s fodder market was MNT 321 Sources: MOFALI (2017); NSO, 2017; Mongolian billion in 2016. Fodder supply totaled 1.4 customs, 2017; Estimations by the author. million tons. Roughages, mineral fodder and concentrates accounted for 75, 21 and 5 Herders’ fodder consumption consisted of 1 percent of the supply, respectively (Table million tons of hay, 25 thousand tons of 1). bran and 5.7 thousand tons of green fodder Domestic fodder production accounts for 97 in addition to 133 thousand tons of hand- percent of the total supply and can be made fodder and natural saline in 2016 divided in use of natural resources, fodder (Table 2). Herder households spent MNT cropping and industrial production. Hay, 883 thousand on average and MNT 142.2 hand-made fodder and saline are prepared, billion in total on feeding. Ninety percent of mostly by herders and farmers, from natural these expenditures were spent on resources. Green fodder and silage crops, haymaking and/or hay purchase. If we valuate the hay made by herders in market perennial grasses and fodder legumesSCIENTIFIC are JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 53 grown countrywide, on 7 to 7452 hectares prices, herders’ fodder consumption was per aimag. In 2016, fodder crops were MNT 232.8 billion. percent of the total supply and can be divided in use grown on 29,893 hectares for a total yield of natural resources, fodder cropping and industrial of 53,424 tons. Manufactured fodder such production.as bran Hay, and hand-made compound fodder feeds and are saline supplied are prepared,by 11mostly fodder by factories herders andand 32farmers, mills withfrom a naturalcombined resources. Greenproduction fodder capacity and silage of crops, 263 perennialthousand grasses tons and perfodder year. legumes In addition, are grown 23 countrywide,small-scale on 7 tofodder 7452 hectaresproduction per aimag.units areIn 2016, fodderoperated crops by were herders grown onand 29,893 intensified hectares for a totallivestock yield of farms 53,424 (NSO, tons. 2017).Manufactured fodder

such as bran and compound feeds are supplied by Fodder consumers include herders, who Figure 2. Structure of concentrate consumption 11 fodderalso factoriesreceive and discounted 32 mills with forages a combined from Figure 2. inStructure 2016, in of% concentrate consumption in productionemergency capacity reserves of 263 thousand of aimag tons and per year.soum Sources: MOFALI, 2016,2017; inNSO, % 2017; Mongolian In addition,governments, 23 small-scale and fodderintensified production livestock units Sources:customs, MOFALI, 2017; Estimations2017; NSO, by2017; the Mongolianauthor. are operatedfarms. by Herders herders anddominate intensified roughage livestock customs, 2017; Estimations by the author. farms (NSO,consumption 2017). while the main buyers of Herders rely on grazing and apply feeding Fodderconcentrates consumers are intensifiedinclude herders, livestock who farms also as Herdersan emergency rely on grazingmeasure and rather apply than feeding a regular practice (cf. Rasmussen and Dorlig, receive(Figures discounted 1 and forages 2). from emergency reserves as an emergency measure rather than a regular 2011). Herders’ fodder consumption per of aimag and soum governments, and intensified practice (cf. Rasmussen and Dorlig, 2011). Herders’animal fodder is unlikely consumption to increase per animal unless is forced unlikely livestock farms. Herders dominate roughage by exceptional weather conditions or to increase unless forced by exceptional weather consumption while the main buyers of concentrates facilitated through policy and private sector conditions or facilitated through policy and private are intensified livestock farms (Figures 1 and 2). initiatives. However, persisting increase in sectorthe numberinitiatives. of livestockHowever, is persisting likely to raiseincrease the in Using the herd sizes and structures thetotal number feeding of livestock expenditures is likely of to herdersraise the by total determined we estimated the total fodder feedingMNT expenditures 7 to 14 billion of perherders year. by MNT 7 to 14 requirements and the current amounts of billion per year. fodder consumption of intensified livestock Intensified livestock farms spent MNT 88.1 farms to establish a fodder balance and billion on feeding in 2016. Dairy, beef, pig and measure the potential for increased use of poultry farms accounted for 58, 10 and 27 percent fodder. The measurement unit used in of this amount, respectively. Goat and horse farms fodder balancing is metabolizable energy and sheep feedlots only contributed 5 percent and (ME), expressed in Megajoule (MJ). were excluded from further analysis. Results Figure 1. Structure of roughage consumption in The amount of fodder consumption of dairy, Figure 1. Structure2016, in %of roughage consumption in 2016, beef, pig and poultry farms totaled 200.1 thousand Mongolia’s fodder market was MNT 321 Sources: MOFALI (2017);in % NSO, 2017; Mongolian billion in 2016. Fodder supply totaled 1.4 Sources:customs, MOFALI 2017; Estimations (2017); by NSO,the author. 2017; tons and met 89 and 56 percent of their requirements million tons. Roughages, mineral fodder Mongolian customs, 2017; Estimations by the for roughage and concentrate feeding, respectively. and concentrates accounted for 75, 21 and 5 author.Herders’ fodder consumption consisted of 1 The overall rate of fodder sufficiency ranges percent of the supply, respectively (Table millionHerders’ tons fodder of hay, consumption 25 thousand consisted tons ofof 1 between 53 percent for pig farms and 71 percent 1). bran and 5.7 thousand tons of green fodder million tons of hay, 25 thousand tons of bran and for dairy and beef farms. The relatively high fodder in addition to 133 thousand tons of hand- Domestic fodder production accounts for 97 5.7 thousand tons of green fodder in addition to sufficiency of dairy and beef farms is explained percent of the total supply and can be made fodder and natural saline in 2016 by their extensive use of grazing and hay feeding 133(Table thousand 2). tonsHerder of hand-made households fodder spent and MNT natural divided in use of natural resources, fodder (Tables 2 and 3). saline883 in thousand 2016 (Table on average2). Herder and households MNT 142.2 spent cropping and industrial production. Hay, MNT 883 thousand on average and MNT 142.2 Total requirements of intensified livestock hand-made fodder and saline are prepared, billion in total on feeding. Ninety percent of billion in total on feeding. Ninety percent of these farms for roughages and concentrates are estimated mostly by herders and farmers, from natural these expenditures were spent on expenditureshaymaking were and/or spent hayon haymakingpurchase. and/orIf we hay at 172 to 186 thousand tons and 131 to 133.5 resources. Green fodder and silage crops, tons, respectively, depending on the composition perennial grasses and fodder legumes are purchase.valuate Ifthe we hay valuate made the by hayherders made in bymarket herders of feeding rations. In relation to the amounts of grown countrywide, on 7 to 7452 hectares in marketprices, prices,herders’ herders’ fodder fodder consumption consumption was was domestic fodder supply in 2016 the farms require per aimag. In 2016, fodder crops were MNTMNT 232.8 232.8 billion. billion. grown on 29,893 hectares for a total yield 28 to 41 thousand tons of roughages and 64 to 67 of 53,424 tons. Manufactured fodder such thousand tons of concentrates. The total value of as bran and compound feeds are supplied by 11 fodder factories and 32 mills with a combined production capacity of 263 thousand tons per year. In addition, 23 small-scale fodder production units are operated by herders and intensified livestock farms (NSO, 2017).

Fodder consumers include herders, who Figure 2. Structure of concentrate consumption also receive discounted forages from in 2016, in % emergency reserves of aimag and soum Sources: MOFALI, 2017; NSO, 2017; Mongolian governments, and intensified livestock customs, 2017; Estimations by the author. farms. Herders dominate roughage consumption while the main buyers of Herders rely on grazing and apply feeding concentrates are intensified livestock farms as an emergency measure rather than a (Figures 1 and 2). regular practice (cf. Rasmussen and Dorlig, 2011). Herders’ fodder consumption per animal is unlikely to increase unless forced by exceptional weather conditions or facilitated through policy and private sector initiatives. However, persisting increase in the number of livestock is likely to raise the total feeding expenditures of herders by MNT 7 to 14 billion per year. 54 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 fodder additionally required in intensified livestock were inseminated artificially in 2016 (MOFALI, farming is between MNT 47 and 50 billion (Tables 2017). The lactation yield of a native Mongolian 4 to 8). cow is approx. 500 kg and that of a crossbred cow Based on above projections, the total capacity at a small dairy farm is approx. 2500 kg, compared of the fodder market at the current number of to 8000 kg of a purebred cow at a large dairy farm. livestock is approx. MNT 370 billion. While Limited know-how is another major cause policies need to facilitate an increase in the overall of inadequate livestock feeding. Effects of capacity of the fodder market in the long term the the knowledge gap are particularly evident at immediate target of domestic fodder supply is the intensified livestock farms. In dairy and beef cattle MNT 50 billion market capacity that is not utilized feeding, for instance, the 64 percent share of hay yet. The key opportunity for increasing domestic in roughage feeding produces a negative rumen supply lies in the unsatisfied fodder requirements of nitrogen balance due to high fiber contents of hay, intensified livestock farms. hence limiting the nutritive value and the benefit- While domestic supply and consumption cost ratio of feeding (cf. Table 4; Kirchgessner, of fodder are affected by a variety of factors 2004). Information and advisory services to help the following issues were identified as the core farmers increase and optimize livestock feeding are constraints: essentially needed. In pastoralism, the indigenous • Limited capacity of haymaking, knowledge base relates to the subsistence-oriented • Insufficient fodder cropping, character of this farming system but if herders are to • Low productivity of livestock, and pursue better economic outcomes they need would • Lack of advisory services. to learn adequate feeding practices as well. The main roughage used in livestock feeding is hay harvested from pastures, whereas 75.5 thousand DISCUSSION tons of hay used by dairy and beef farms in 2016 Government policies on fodder and livestock are rather insignificant in comparison to 1 million feeding, as formulated in the State Policy on Food tons used by herders. Herders’ hay requirements and Agriculture (2015-2025) and the Mongolian are expected to grow by up to 100 thousand tons Livestock Program (2010-2021), are currently per year. At the current 65 percent degradation rate being implemented through a set of measures of pasture degradation, however, the capacity for defined in the Government Action Plan 2017-2020. haymaking is nearly exhausted (SDC, 2015). Our findings on the needs of the fodder market for Fodder crops were grown in 20 aimags in intervention underline the following shortcomings 2016. A major share of the growers are herders in the current fodder policies. and livestock farmers, who merely experiment on • Policies promoting haymaking conflict plots as small as 0.1 to 1 hectare. They are unable with the urgent need to reduce overuse to upscale cropping due to lack of access to arable of pastures; land, equipment and funds. Mechanized crop farms, • Policies promoting fodder cropping on the other hand, are reluctant to grow fodder crops are focused on technical issues such due to uncertain market demand. Insufficient fodder as seed multiplication and plant cropping correlates with extensive hay feeding and protection rather than on establishing caused imports of green fodder, grain and legumes value chains to secure market demand with a combined worth of MNT 14.5 billion in 2016 for the crops. (Mongolian Customs, 2017). • Policies targeting increased fodder The purchasing power and motivation of consumption respond to the needs most herders and smaller livestock farmers to of farmers and herders for funds and increase their fodder consumption is limited by low arable land but neglect the need to productivity of livestock, which is mainly caused facilitate access to information and by lack of breeding services and unaffordable advice. prices of purebred animals. As an example, out of • Planned investments in new fodder nearly 40 thousand dairy and beef cows only 2100 factories contrast with the fact that only SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 55

38 percent of the existing capacity of 2. Incentives and value chains for fodder industrial fodder is currently utilized. crops need to be established. The related Overall, the policies need a systematic recommendations are to link wheat subsidy approach for increasing fodder supply in balance to fodder cropping, and to offer incentives with the market demand and prioritizing urgent such as higher subsidies or tax benefits issues such as the need to prevent further degradation to crop farms that grow fodder crops and of pastures and improve livestock productivity over food processors that deliver byproducts non-essential measures such as establishment of for industrial fodder production. new fodder factories. 3. A functioning structure of agricultural advisory services is essentially required CONCLUSIONS for facilitating enhanced livestock feeding The current volume of the fodder market is practices. Recommended actions include MNT 321 billion but the capacity of the market to be restoration of the former aimag-level targeted by policies and the private sector is MNT Extension Centers, creation of a ministerial 370 billion. The key opportunity for increasing unit or position in charge of advisory domestic fodder supply is the unsatisfied fodder services, regular training of local livestock requirement of intensified livestock farms. specialists in providing information and This study recommends an overall shift of the advice on livestock feeding, and incentives focus of fodder policies from boosting production such as soft loans for intensified livestock to stimulating consumption. The following policy farms to engage qualified advisors in directions and key interventions are required for improving their feeding practices. improving domestic supply and consumption of 4. A holistic framework that creates fodder. synergies between the priorities in crop 1. Haymaking from pastures needs to be and livestock sectors and different policy restricted and hay feeding should be measures relating to the goal of increasing repressed by using cultivated forages. fodder cropping and enhancing livestock Besides regulation of pasture use, feeding is required. Such a framework recommended measures include supply of is best incorporated in a subprogram on cultivated forages into emergence fodder livestock fodder. reserves, establishment of forage cropping 5. Utilization of the existing capacity of units as partnerships between local fodder production needs to be prioritized governments and herders or livestock over creation of additional capacity. The farms, stopping the subsidization of planned investments in new fodder haymaking equipment and providing factories should be redirected to herders and farmers with access to arable support existing producers and land, cropping equipment and soft loans stimulate increased fodder demand for instead. better outcomes. 56 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Table 1. Fodder supply in 2016 Average price, Market value, Fodder Amount, t MNT 1000 per t MNT million Domestic supply Hay 1,100,000 200 220,000 Straw 35,700 100 3,570 Green fodder 34,400 250 8,600 Silage 7,900 250 1,975 Waste potato and vegetables 3,000 200 600 Waste grain 7,200 350 2,520 Bran 60,000 550 33,000 Compound feeds 27,100 750 to 1000 25,352 Hand-made fodder 38,100 Natural saline 105,600 150 15,840 Domestic supply subtotal 1,419,000 311,457 Imports Hay 20 95 1.9 Green fodder 10,913 409 4,469 Waste grain 5,983 289 1,703 Compound feeds 1,815 1,829 3,320 Imports subtotal 18,641 9,493 Total 1,437,641 320,950 Sources: MOFALI, 2017; NSO, 2017; Mongolian customs, 2017; Estimations by the author.

Table 2. Gross amounts of fodder consumption in 2016 Consumption of intensified livestock farms, t Consumption Fodder of herders, t† Dairy and Pig Poultry Other Farms beef farms farms farms farms‡ total Roughages Hay 1,016,073 75,552 8,395 83,947 Straw 32,130 3,570 35,700 Green fodder 5,690 35,661 3,962 39,624 Silage 7,900 0 7,900 Waste potato and vegetables 3,000 0 3,000 Subtotal 1,021,762 151,244 3,000 - 15,927 170,171 Concentrates Waste grain 1,735 1,964 9,034 360 13,093 Bran 25,289 29,504 3,471 0 1,736 34,711 Compound feeds 2,999 6,558 19,068 289 28,915 Subtotal 25,289 34,238 11,993 28,102 2,385 76,718 Other Hand-made fodder 38,100 Natural saline 95,040 10,560 Subtotal 133,140 10,560 Total 1,180,192 185,481 14,993 28,102 18,312 257,449 Sources: MOFALI, 2017; NSO, 2017; Mongolian customs, 2017; Estimations by the author. † Herders’ consumption includes the amounts received from emergency reserves of local governments. ‡ Other farms include goat and racehorse farms and sheep feedlots. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 57

Table 3. Fodder balance of intensified livestock farms† Dairy and beef Key figures Pig farms Poultry farms Total farms Energy intake from feeding, MJ ME From roughages 605,209,398 31,008,000 636,217,398 From concentrates 292,831,022 125,617,846 266,206,181 684,655,049 Total energy intake from feeding 898,040,420 156,625,846 266,206,181 1,320,872,447 Energy requirements, MJ ME On roughage consumption 670,456,708 47,723,919 - 718,180,627 On concentrate consumption 588,697,990 245,378,114 390,847,355 1,224,923,460 Total requirements 1,259,154,699 293,102,032 390,847,355 1,943,104,087 Rate of fodder sufficiency, % Roughage sufficiency 90% 65% 89% Concentrate sufficiency 50% 51% 68% 56% Total fodder sufficiency 71% 53% 68% 68% † ME intakes from different roughages and concentrates were estimated using reference values published in Kirchgessner (2004); Togtokhbayar et al. (2005), Kalashnikov et al. (2007) and www.altantaria.mn.

Table 4. Total roughage requirements of intensified livestock farms Composition of Gross amounts Key figures MJ ME required roughages used required*, t Dairy and beef cattle: at current roughage compositions Hay 63.7% 426,858,118 83,698 Straw 22.1% 148,248,671 35,594 Green fodder 11.5% 77,233,911 39,506 Silage 2.7% 18,116,008 8,752 Total 670,456,708 167,549 Dairy and beef cattle: at improved roughage compositions† Hay 57.0% 382,160,324 74,933 Straw 22.1% 148,248,671 35,594 Green fodder 16.0% 107,273,073 54,871 Silage 4.9% 32,774,640 15,833 Total 670,456,708 181,232 Pigs Waste potato and vegetables 100% 47,723,919 4,617 † “Improved composition of roughages” involves assumed reduction (from 63.7 percent to 57 percent) in the percen- tal shares of hay for allowing shares of green fodder and silage to increase by 16 and 5 percent, respectively, thus improving the digestibility of roughage rations. 58 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Table 5. Total concentrate requirements of intensified livestock farms at current composition of concentrates used Composition of Required energy supply, Gross amounts required, Key figures concentrates used MJ ME t Dairy and beef farms Waste grain 5.0% 29,641,607 3,487 Bran 85.2% 501,500,414 59,314 Compound feeds 9.8% 57,555,970 6,029 Subtotal 588,697,990 68,831 Pig farms Waste grain 13.3% 32,607,829 3,836 Bran 24.4% 59,903,793 6,780 Compound feeds 62.3% 152,866,491 12,811 Subtotal 245,378,114 23,428 Poultry farms Waste grain 23.1% 90,195,198 13,264 Compound feeds 76.9% 300,652,157 27,996 Subtotal 390,847,355 41,260 Total amounts Waste grain 20,587 Bran 66,094 Compound feeds 46,836 Total 133,518

Table 6. Total concentrate requirements of intensified livestock farms at improved compositions of concentrates used† Composition of Required energy supply, Key figures Gross amounts required, t concentrates used MJ ME Dairy and beef farms Waste grain 15% 88,304,699 10,389 Protein-rich crops 5% 29,434,900 2,567 Bran 60% 353,218,794 41,776 Compound feed 20% 117,739,598 12,334 Subtotal 588,697,990 67,066 Pig farms Waste grain 15% 36,806,717 4,330 Protein-rich crops 5% 12,268,906 864 Bran 15% 36,806,717 4,166 Compound feed 65% 159,495,774 13,367 Subtotal 245,378,114 22,727 Poultry farms Waste grain 23.1% 90,195,198 13,264 Compound feed 76.9% 300,652,157 27,996 Subtotal 390,847,355 41,260 Total amounts Waste grain 27,983 SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 59

Bran 3,431 Bran 45,942 Compound feed 53,697 Total 131,053 † “Improved composition of concentrates” involves assumed increase in the percental shares of waste grain and compound feeds and introduction protein-rich crops such as legumes in dairy and beef cattle and pig feeding for repressing the share of bran, thus improving the overall digestibility of concentrate rations.

Table 7. Summary of additional fodder requirements of intensified livestock farms At current compositions of At improved compositions of Key figures fodder consumption, t fodder consumption, t Roughages Hay 8,163 -601 Straw 3,464 3,464 Green fodder 13,666 29,032 Silage 852 7,933 Waste potato and vegetables 1,617 1,617 Roughages subtotal 27,763 41,445 Concentrates 27,763 41,445 Waste grain 13,747 21,143 Protein-rich crops 3,431 Bran 33,119 12,967 Compound feed 20,007 26,868 Concentrates subtotal 66,874 64,409 Total 94,637 105,854

Table 8. Monetary value of additional fodder requirements of intensified livestock farms At current compositions of fodder At improved compositions of fodder Key figures consumption, MNT million consumption, MNT million Roughages Hay 1,633 -120 Straw 346 346 Green fodder 3,417 7,258 Silage 213 1,983 Waste potato and vegetables 323 323 Roughages subtotal 5,932 9,791 Concentrates Waste grain 4,812 7,400 Protein-rich crops 1,811 Bran 18,216 7,132 Compound feed 18,299 23,500 Concentrates subtotal 41,326 39,842 Total 47,258 49,633 60 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

REFERENCES 9. Namjim T. (2004). Economy of Mongolia 1. Durst, L. and Wittmann, M. (vol. 1). Ulaanbaatar: Mongolian Academy (2001). Tierernaehrung. Triesdorf: of Sciences. Fachhochschule Weihenstephan. 10. National Statistical Office (2013, 2016, 2. Erdenebolor, B. (2008): Improving Dairy 2017). Agricultural sector 2012, 2013, Farming: A situation analysis of the dairy 2016. farming sector in Mongolia and strategies 11. Nyambat, L. and Gerelkhuu, T. (2017). for extension work. Weikersheim, Number and structure of livestock in Germany: Margraf Publishers. Mongolia: Pasture and fodder. Proceedings 3. Gurbazar, D., Rinchindorj, D. and of the seminar “Fodder production and Mungunbagana, T. (2017). Industrial fodder market”. Ulaanbaatar: MULS. fodder production. Proceedings of the 12. Rasmussen, D. and Dorlig, Sh. (2011). seminar “Fodder production and fodder Improving feed and fodder supply for market”. Ulaanbaatar: Mongolian dzud management. Retrieved from http:// University of Life Sciences. documents.worldbank.org/curated/ 4. Kalashnikov, A.P., W. Scheglov, V.V. en/158631468274239063/Mongolia- and Pervov, N.G. (Eds.) (2007). Norms Improving-feed-and-fodder-supply-for- and rations of livestock feeding (revised dzud-management 3rd ed.). Moscow: Ministry of Agriculture 13. Togtokhbayar, N., Gendaram, Kh., of the Russian Federation. Sodnomtseren, Ch. and Otgonjargal, A. 5. Kirchgessner, M. (2004). Tierernaehrung (2005). Sheet of nutritional values of (revised 11th ed.). Frankfurt am Main: fodder expressed in metabolizable energy. DLG Verlag. Ulaanbaatar: Mongolian State University 6. Ministry of Food, Agriculture and Light of Agriculture. Industry (2016). Evaluation report of 14. Togtokhbayar, N., Jigjidsuren, S. and the activities of the Ministry of Food, Sodnomtseren, Ch. (2017). Current Agriculture and Light Industry. situation and development policy of fodder 7. Ministry of Food, Agriculture and Light production. Proceedings of the seminar Industry (2017). Current situation of the “Fodder production and fodder market”. food, agriculture and light industry sector. Ulaanbaatar: MULS. 8. Mongolian Customs (2017). Customs statistics 2016. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 61

ANNEXES

Annex 1. Number of intensified livestock farms and livestock as of the end of 2016 Livestock farms Number of farms Number of animals Dairy farms 1,472 60,998 Beef farms 175 14,974 Milk goat farms 47 1,219 Pig farms (enterprises) 70 17,723 Pig farms (family farms) 980 17,981 Chicken farms (enterprises) 40 841,005 Chicken farms (family farms) 1,269 39,109 Source: MOFALI, 2017.

Annex 2. Estimated stock structures of intensified livestock farms in 2016† Percental share in Number of animals Animals grouped by sex and age total stock (average per month) Dairy cattle- Purebreds Cows 49.340% 7,524 Bulls 0.987% 150 Heifers in 19th to 30th month 18.178% 2,772 Heifers in 13th to 18th month 10.094% 1,539 Calves in 5th to 12th month 14.074% 2,146 Calves in first 4 months 7.326% 1,117 Dairy cattle – Crossbreeds Cows 49.340% 22,573 Bulls 0.987% 451 Heifers in 19th to 30th month 18.178% 8,316 Heifers in 13th to 18th month 10.094% 4,618 Calves in 5th to 12th month 14.074% 6,439 Calves in first 4 months 7.326% 3,352 Total number of dairy cattle 61,000 Beef cattle Bulls 2.300% 344 Cows 46.002% 6,888 Heifers (for replacing culled cows) 11.829% 1,771 Male young cattle (for fattening) 9.200% 1,378 Female young cattle (for fattening) 12.267% 1,837 Calves 18.401% 2,755 Total number of beef cattle Pigs Boars 0.230% 82 Sows 11.524% 4,114 Gilts for breeding (above 4 months of age) 4.753% 1,697 Fattening pigs (above 4 months of age) 39.268% 14,020 Piglets in 4th month 10.345% 3,694 Piglets in 3rd month 10.890% 3,888 Piglets in 2nd month 10.890% 3,888 Piglets in 1st month 12.100% 4,320 Total number of pigs 35,704 Chickens Roosters 8.000% 70,409 62 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Laying hens 80.000% 704,091 Chicks: 151st to 180th day of age 1.956% 17,214 Chicks: 121st to 150th day of age 1.966% 17,306 Chicks on 91st to 120th day of age 1.977% 17,400 Chicks on 61st to 90th day of age 1.988% 17,493 Chicks on 31st to 90th day of age 1.998% 17,588 Chicks in first 30 days 2.115% 18,613 Total chicken stock 880,114 † Stock structures were estimated through mathematic models based on the numbers livestock in Annex 1.

Annex 3. Energy requirements of dairy and beef cattle and pigs on feeding, per animal and year Energy Energy Total energy requirement on requirement on Animals grouped by sex and age requirement on roughage feeding, MJ concentrate feeding, feeding, MJ ME ME MJ ME Purebred dairy cattle Cow 40,205 21,939 18,266 Bull 22,804 13,679 9,125 Heifer, between 19th and 30th month 20,640 13,340 7,300 Heifer, between 13th and 18th month 15,235 9,714 5,521 Calf, between 5th and 12th month 12,088 8,039 4,049 Calf, below 4 months* 1,659 664 995 Crossbred dairy cattle Cow 19,405 8,444 10,960 Bull 15,794 8,442 7,351 Heifer, between 19th and 30th month 15,017 9,136 5,881 Heifer, between 13th and 18th month 10,984 6,537 4,448 Calf, between 5th and 12th month 8,965 5,703 3,262 Calf, below 4 months 1,361 544 816 Beef cattle Bull 15,500 10,075 5,425 Cow 14,000 9,100 4,900 Heifer 11,000 7,150 3,850 Male cattle, between 12 and 18 months 8,000 2,400 5,600 Female cattle, between 12 and 18 7,000 2,100 4,900 months Calves 6,000 3,000 3,000 Pigs Boar 14,564 2,185 12,379 Sow 14,000 2,800 11,200 Gilt, between 4th and 13th month 10,768 1,615 9,152 Fattening pig in 5th to 8th month 10,846 1,627 9,219 Piglet in 4th month 7,300 1,095 6,205 Piglet in 3th month 4,998 750 4,248 Piglet in 2nd month 3,275 650 2,620 Piglet in 1st month 1,120 224 896 Sources: MJ ME requirements were estimated using reference values in Kirchgessner (2004) and Kalashnikov et al., (2007). SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 63

Annex 4. Energy requirements of chickens on concentrate feeding, per animal and year Categories Energy requirement per day, MJ ME Energy requirement per year, MJ ME Rooster 1.408 513.9 Laying hen 1.275 465.4 Chick in 6th month 1.023 373.4 Chick in 5th month 0.922 336.5 Chick in 4th month 0.816 297.8 Chick in 3th month 0.710 259.2 Chick in 2nd month 0.559 203.9 Chick in 1st month 0.213 77.6 Sources: MJ ME requirements were estimated using reference values in Kirchgessner (2004) and Kalashnikov et al., (2007). 64 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

THE EFFECT OF PERSONAL USE OF FUELWOOD ON MARKET AVAILABILITY (SALES) IN AUSTRIA

Martin Braun1, Peter Schwarzbauer1,2

1University of Natural Resources and Life Sciences, Vienna (BOKU), Institute of Marketing & Innovation, Feistmantelstr. 4, 1180 Vienna, Austria. E-Mail: [email protected] 2Kompetenzzentrum Holz (Wood K plus), Team Market Analysis and Innovation Research, Feistmantelstr. 4, 1180 Vienna, Austria. E-Mail: [email protected]

Abstract To combat climate change, a transformation from a fossil-based towards a bio-based economy is imperative. Efficient utilisation of raw materials and management of value-chains is necessary to ensure climate change mitigation. The presented study contributes to the re-evaluation of the interdependencies between material and energy use of wood-based raw materials in the Austrian forest-based sector (FBS). To date personal use of fuelwood by forest owners and the effects on fuelwood available to the market was not properly assessed. After analysis of secondary data and re-evaluation of the main material flows, this aspect was analysed by identifying variables through correlation and subsequent regression analyses. The study at hand shows a selection preliminary results, which can be included into a national FBS-model. In the future these results will help decision makers to improve the sustainable and economically feasible utilisation of wood-based raw materials.

INTRODUCTION the security of supply of renewable energy as well The availability of wood supply from forests as of bio-based raw materials. While the general for energy purposes plays an important role for supply situation in Austria is already well known de-carbonising the Austrian economy. In countries (List et al., 2016; Schwarzbauer, Huber, Stern, & with a high share of private forest ownership a Koch, 2012), information about wood supply with significant portion of fuelwood is used by forest consideration of own consumption (wood used for owners themselves and thus not available on the personal use, and thus not available on the market) market even though this would be possible in is a topic where to date no analysis is available. terms of biomass quality. This aspect is entirely The objectives of the study at hand are thus neglected in current statistics which consider to (1) determine which factors influence the the entire material flow of wooden biomass for magnitude of internal consumption as well as the energy to be available on the market. In Austria, market availability of fuelwood and to (2) determine this material flows are part of complex value-chain and quantify the relationship between internal dynamics with potential conflicts regarding the consumption and market availability of fuelwood. material and energy use of wood (Schwarzbauer & Stern, 2010). Another aspect influencing fuelwood MATERIAL AND METHODS sales are large-scale storm events, which can In a first step, data from various sources considerably affect wood markets (Schwarzbauer, was reviewed, aggregated and homogenised. 2007). Furthermore, demographic change of forest There are three main statistics describing various owners (especially in small private forests; Hogl, aspects of the forest-based sector in Austria: The Pregernig, & Weiss, 2005) is affecting market Austrian Forest Inventory (AFI), the timber felling conditions with a transition of owners of small report (TFR; e.g. BMNT, 2018) and the wood private forests from those with an agriculture and/ flows of Austria (WFA; e.g. Strimitzer, Höher, & or forestry background to those without any forest- Nemestothy, 2017). Because of their different focus or wood-market-related expertise/interest. (available forest resources, supply, and processing) When considering possible optimisation these data are not homogenous. The main data pathways to manage the wood-based value chain the source for data about internal use and marketed internal consumption has to be considered to ensure fuelwood was derived from the TFRs 1970-2016 2. Material and Methods In a first step, data from various sources was while after 2006 fuelwood was further reviewed, aggregated and homogenised. differentiated into firewood and FWC (Figure There are three main statistics describing 1). This structural break in data reporting was various aspects of the forest-based sector in considered in our analyses. Austria: The Austrian Forest Inventory (AFI), Fuelwood from wood processing industries the timber felling report (TFR; e.g. BMNT,SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 65 2018) and the wood flows of Austria (WFA; mainly consists of sawmilling by-products (wood shavings, wood chips from processing, one.g. an Strimitzer,annual basis. Höher, The data& Nemestothy, was differentiated 2017). by slabs, briquettes, and pellets). Additionally, data on Because of their different focus (available edgings, slabs, briquettes, and pellets). ownership category (SPF – small private forests < post-consumerAdditionally, wood data and on barkpost-consumer is available. woodWhile 200forest ha; resources,LPF – large supply, private and forests processing) ≥ 200 ha; these STF – bark is reported a distinct material flow in the WFA, data are not homogenous. The main data and bark is available. While bark is reported a State Forests) and by type of wood (C – coniferous, maindistinct bark materialfractions floware included in the WFA, in other main material bark Nsource – non-coniferous). for data about internal use and flows in reality and thus are not subject to specific marketed fuelwood was derived from the fractions are included in other material flows In the WFA a differentiation is made between market dynamics. TFRs 1970-2016 on an annual basis. The data in reality and thus are not subject to specific fuelwood from logging activities and fuelwood After determining the relevant material flows was differentiated by ownership category market dynamics. consisting of by-products from wood processing for fuelwood from logging activities, we conducted (SPF – small private forests < 200 ha; LPF – After determining the relevant material flows industries. Fuelwood from logging activities descriptive analyses, bivariate correlation large private forests ≥ 200 ha; STF –State for fuelwood from logging activities, we consists mainly of split logs and forest wood chips analyses and subsequently regressions analyses to Forests) and by type of wood (C – coniferous, conducted descriptive analyses, bivariate (FWC).N – non-coniferous). Before 2006 these categories were denoted econometricallycorrelation determineanalyses theand relationship subsequently between as firewood (i.e. “timber used for the purpose of fuel internalregressions consumption analyses and marketto econometrically availability of woodIn the and WFA energetic a differentiation purposes in islog made wood between boilers”; fuelwood. Data about storm damage (mainly from fuelwood from logging activities and determine the relationship between internal Strimitzer et al., 2017) in the TFR, while after 2006 windconsumption throw) was andincluded market as wellavailability as oil prices, of fuelwoodfuelwood was consisting further differentiated of by-products into firewoodfrom temperature data (winter deviation from the mean wood processing industries. Fuelwood from fuelwood. Data about storm damage (mainly and FWC (Figure 1). This structural break in data of 1961-1990; ZAMG, 2018), exchange rates and logging activities consists mainly of split logs from wind throw) was included as well as oil reporting was considered in our analyses. the consumer price index (for deflation) were taken and forest wood chips (FWC). Before 2006 prices, temperature data (winter deviation theseFuelwood categories from were wood denoted processing as firewoodindustries fromfrom the the Austrian mean Statisticsof 1961-1990; Office. ZAMG, 2018), mainly(i.e. “timber consists usedof sawmilling for the by-productspurpose of (woodfuel exchange rates and the consumer price index shavings,wood and wood energetic chips frompurposes processing, in log edgings,wood (for deflation) were taken from the Austrian boilers”; Strimitzer et al., 2017) in the TFR, Statistics Office.

FigureFigure 1. (a) 1.Logging (a) Logging of fuelwood of fuelwood (Firewood (Firewood + FWC, aggregates: + FWC, C+N, aggregates: all ownership C+N, categories), all ownership note the categories), structural break; note (b) the index for structuralown consumption, break; oil (b) price index and for winter own temperatureconsumption, (deviation oil price from and average winter monthly temperature winter temperature);(deviation from (c) indexaverage for own consumption,monthly winter non-coniferous temperature); firewood (c) price index (N), forconiferous own consumption, firewood price non-coniferous(C) firewood price (N), coniferous firewood price (C)

RESULTS Fuelwood sales showed much more volatility In the decade 2006-2015 about 58% (4.9 mil. than internal consumption, but the increase in m³) of fuelwood was used by the forest owners internal consumption was more pronounced than themselves (internal consumption); with SPF using sales. Especially for SPF sales seem to be much about 70% (3.7 mil. m³) of the fuelwood supplied more affected by market conditions than internal by their forests. SPF also have the highest share of consumption. Figure 2 also shows that for internal total energy consumption (2.6 mil. m³; 90 %). SPF consumption SPF have to be investigated since LPF provided about 53.8% of market-available wood, and STF volumes are small and constant. Sales of LPF 32.7% (0.69 mil. m³), and the STF 13.5% wood fuel on the other hand have to be investigated (0.28 mil m³). by ownership category.

3. Results In the decade 2006-2015 about 58% (4.9 mil. have the highest share of total energy m³) of fuelwood was used by the forest consumption (2.6 mil. m³; 90 %). SPF owners themselves (internal consumption); provided about 53.8% of market-available 3.with Results SPF using about 70% (3.7 mil. m³) of the wood, LPF 32.7% (0.69 mil. m³), and the STF fuelwood supplied by their forests. SPF also 13.5% (0.28 mil m³). In the decade 2006-2015 about 58% (4.9 mil. have the highest share of total energy m³) of fuelwood was used by the forest consumption (2.6 mil. m³; 90 %). SPF owners themselves (internal consumption); provided about 53.8% of market-available with66 SPF| SCIENTIFIC using about JOURNAL-AGRICULTURAL 70% (3.7 mil. m³) ECONOMICS of the - 2018wood, LPF 32.7% (0.69 mil. m³), and the STF fuelwood supplied by their forests. SPF also 13.5% (0.28 mil m³).

Figure 2. Comparison of fuelwood used for (a) own consumption; and (b) fuelwood sold (SPF – small private forests <200 ha; LPF – large private forests ≥ 200 ha; STF – state forests)

Fuelwood sales showed much more volatility wood fuel on the other hand have to be than internal consumption, but the increase in investigated by ownership category. internal consumption was more pronounced FigureFigure 2. Comparison 2. Comparison of fuelwood of fuelwoodused for (a) used own for consumption; (a) own consumption; and (b)General fuelwood and trends sold (b) (SPFfuelwood in – smallthe sold privateratio (SPF forestsof – coniferoussmall <200 private ha; LPF to – largethan private sales. forests Especially ≥ 200forests ha; STFfor <200 – SPFstate ha; forests)sales LPF –seem large toprivate forests ≥ 200 ha; STF – state forests) be much more affected by market conditions non-coniferous fuelwood are relatively stable (averaged 1986-2015: 60% coniferous, 40% Fuelwoodthan internalGeneral sales trendsconsumption. showed in themuch ratio Figuremore of coniferous volatility 2 also to coniferous),wood fuel whileon thethe othershare ofhand coniferous have towood be non-coniferous), while the share of coniferous thanshowsnon-coniferous internal that for consumption, internal fuelwood consumption butare therelatively increase SPF have stablein increasedinvestigated drastically by ownership for fuelwood category sales. since 2005 internalto be investigatedconsumption sincewas moreLPF pronouncedand STF wood increased drastically for fuelwood sales (averaged 1986-2015: 60% coniferous, 40% non- (FigureGeneral 3). trends in the ratio of coniferous to thanvolumes sales. are Especially small and for constant.SPF sales Salesseem ofto since 2005 (Figure 3). be much more affected by market conditions non-coniferous fuelwood are relatively stable than internal consumption. Figure 2 also (averaged 1986-2015: 60% coniferous, 40% shows that for internal consumption SPF have non-coniferous), while the share of coniferous to be investigated since LPF and STF wood increased drastically for fuelwood sales volumes are small and constant. Sales of since 2005 (Figure 3).

FigureFigure 3. Shares 3. Shares of coniferous of coniferous fuelwood fuelwood (C) and non-coniferous (C) and non-coniferous fuelwood (N) fuelwoodused for (a) (N) own used consumption; for (a) own and consumption; (b) sold fuelwood and (b) sold fuelwood

Correlation analyses and LPF C-own consumption in the previous year An initial approach was to test the following (0.42, p=0.02) as well as for LPF N-sales and LPF Figurehypothesis: 3. Shares ofThe coniferous higher fuelwood the (C)own and non-coniferousconsumption fuelwood N-own (N) used consumption for (a) own consumption; in the currentand (b) sold year fuelwood (0.47, of fuelwood, the lower the amount of fuelwood p=0.01) and the previous year (0.56; p=0.001). available for sale (negative correlation coefficient). As stated above, the next analysis investigated Correlation coefficients were determined for C the correlation between SPF own consumption and and N and for SPF, LPF, STF and an aggregate monthly winter temperature deviations as well as of all categories (“All”) between sales and own price changes. While no significant correlation consumption in the current year as well as in the could be determined between own consumption previous year. No significant negative correlation and winter temperature, significant relationships could be found for SPF and “All”, while a significant were found for oil price, firewood price, and storm positive correlation was found between LPF C-sales damage (cf. Figure 4). 3.1 Correlation analyses An initial approach was to test the following p=0.02) as well as for LPF N-sales and LPF hypothesis: The higher the own consumption N-own consumption in the current year (0.47, of fuelwood, the lower the amount of p=0.01) and the previous year (0.56; fuelwood available for sale (negative p=0.001). correlation coefficient). Correlation coefficients were determined for C and N and As stated above, the next analysis investigated for SPF, LPF, STF and an aggregate of all the correlation between SPF own categories (“All”) between sales and own consumption and monthly winter temperature consumption in the current year as well as in deviations as well as price changes. While no the previous year. No significant negative significant correlation could be determined correlation could be found for SPF and “All”, between own consumption and winter while a significant positive correlation was temperature, significant relationships were found between LPF C-sales and LPF C-ownSCIENTIFIC foundJOURNAL-AGRICULTURAL for oil price, firewood ECONOMICS price, - 2018and storm | 67 consumption in the previous year (0.42, damage (cf. Figure 4).

FigureFigure 4. 4. Correlation Correlation coefficients coefficients for ownfor ownconsumption consumption and winterand winter temperature temperature (deviation (deviation from fromaverage average monthly monthly winter temperature),winter temperature), oil price (current oil year),price firewood(current priceyear), and firewood storm damage price forand (a) storm own consumptiondamage for of(a) coniferous own consumption wood (C) in of small coniferousprivate forests wood and (C)(b) own in small consumption private of forests non-coniferous and (b) ownwood consumption (N) in small private of non-coniferous forests. Firewood wood price (N) are infor small coniferous private and non-coniferous firewood, respectively. Dashed lighter bars are not significant forests. Firewood price are for coniferous and non-coniferous firewood, respectively. Dashed lighter bars are not For sales all ownership categories (SPF, LPF,significant STF, “All”) were investigated. While there was Forno correlationsales all ownership of sales categories to monthly (SPF, winter LPF, In most ownership categories there is a positive STF,temperature “All”) were deviation investigated. there were While significantly there was no correlation between sales and fuelwood price (with positive correlations to the oil price (previous correlation of sales to monthly winter temperature1 the exception of SPF, where own consumption deviationyear; with the there exception were of significantly STF N-sales ). positive generally plays a larger role), For C-sales storm correlationsIn most ownership to the oil price categories (previous thereyear; withis thea events show a positive and significant correlation, exceptionpositive ofcorrelation STF N-sales 1between). sales and while this is generally not the case for N-sales fuelwood price (with the exception of SPF, (Figure 5). where own consumption generally plays a larger role), For C-sales storm events show a positive and significant correlation, while this is generally not the case for N-sales (Figure 5).

1 This could be related to warehousing of STF, but this assumption has to be further investigated.

FigureFigure 5. Correlation 5. Correlation coefficients coefficients for sales and for winter sales temperatureand winter temperature(deviation from (deviation average monthly from averagewinter temperature), monthly winter oil pr ice (previoustemperature), year), firewood oil price price (previous and storm year), damage firewood for (a) salesprice of and coniferous storm wooddamage (C) forin small (a) salesprivate of forestsconiferous and (b) wood sales (C)of non- in coniferoussmall private wood forests(N) in small and private (b) sales forests. of non-coniferous Firewood prices woodare for (N) coniferous in small and private non-coniferous forests. Firewoodfirewood, respectively. prices are Stoforrm damageconiferous is depicted and non-coniferous for previous year firewood,in (a) and for respectively. current year in Storm (b). Dashed damage lighter is barsdepicted are not for significant previous year in (a) and for current year in (b). Dashed lighter bars are not significant 3.2 Regression analyses Regression analyses were performed for own fuelwood and FWC from 2006 (cf. 1 consumptionThis could be relatedand to warehousingsales of of STF,fuelwood but this Introduction). assumption(respective has dependent to be further variable) investigated. as a function of winter temperature, oil price, fuelwood As justified above, analyses for own price, storm damage, and a dummy variable. consumption focus on SPF and an aggregate The dummy variable was introduced to of all ownership categories (“All”). Table 1 determine the role of the “structural break” in shows the elasticities of own consumption of reporting by differentiation of fuelwood into fuelwood with regard to the explanatory variables. Table 1. Regression results for own consumption for small private forests (SPF) and all ownership categories (All) for coniferous fuelwood (C) and non-coniferous fuelwood (N). In case of multicollinearity variables were removed on a per-case basis (denoted as “-“). Significant elasticities are shown in bold.

Owner- Type Const. Avg. Fire- Storm Oil Dummy R2 ship winter wood damage price 2006- (corr.) temp. price (C/N) 2015 (°C+10) (C/N)

SPF C 21.30** .11 -3.13** .04 - .47** .96**

N 20.43** .08 -1.94** -.09 - .39** .88** All C 19.82** .13 -2.47** .03 - .33** .91**

N 18.93** .11 -1.54** -.07 - .40** .88**

The regression equation shows a high “structural break”. Winter temperature and coefficient of determination for coniferous storm damage do not have an impact on own and non-coniferous fuelwood (e.g. R² SPF C- consumption. own consumption=0.96; N-own consumption=0.88) with an negative elasticity Table 2 shows regression results for sales of for fuelwood prices and a positive effect of fuelwood in relation to respective explanatory the respective dummy variable relativizing the variables. Own consumption only has little explanatory power with regard to sales as 68 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Regression analyses fuelwood into fuelwood and FWC from 2006 (cf. Regression analyses were performed for own Introduction). consumption and sales of fuelwood (respective As justified above, analyses for own dependent variable) as a function of winter consumption focus on SPF and an aggregate of all temperature, oil price, fuelwood price, storm ownership categories (“All”). Table 1 shows the damage, and a dummy variable. The dummy elasticities of own consumption of fuelwood with variable was introduced to determine the role of the regard to the explanatory variables. “structural break” in reporting by differentiation of

Table 1. Regression results for own consumption for small private forests (SPF) and all ownership categories (All) for coniferous fuelwood (C) and non-coniferous fuelwood (N). In case of multicollinearity variables were removed on a per-case basis (denoted as “-“). Significant elasticities are shown inbold . Owner- Avg. winter Fire-wood Storm damage Oil Dummy R2 Type Const. ship temp. (°C+10) price (C/N) (C/N) price 2006-2015 (corr.) C 21.30** .11 -3.13** .04 - .47** .96** SPF N 20.43** .08 -1.94** -.09 - .39** .88** C 19.82** .13 -2.47** .03 - .33** .91** All N 18.93** .11 -1.54** -.07 - .40** .88**

The regression equation shows a high For sales of coniferous fuelwood (C) for coefficient of determination for coniferous and LPF and STF the fuelwood price (C) is significant non-coniferous fuelwood (e.g. R² SPF C-own (price elasticity for LPF=1.8; for STF=2.3); also consumption=0.96; N-own consumption=0.88) storm damage is significant but less important. with an negative elasticity for fuelwood prices There is no significant explanatory value of winter and a positive effect of the respective dummy temperature and oil price (the latter was removed variable relativizing the “structural break”. Winter due to multicollinearity). temperature and storm damage do not have an With respect to N-sales the fuelwood price impact on own consumption. (N) has a strong and significant influence in all Table 2 shows regression results for sales ownership categories, with results suggesting that of fuelwood in relation to respective explanatory SPF-owners are more actively selling N-fuelwood. variables. Own consumption only has little In all ownership categories N-sales are price elastic explanatory power with regard to sales as shown by (SPF=1.2, LPF=1.9, STF=2.9). Because storm the low coefficient of determination. damage was small for N-fuelwood results are not significant.

Table 2. Regression results for sales of fuelwood for small private forests (SPF), large private forests (LPF), state forest (STF), and all ownership categories (All) for coniferous fuelwood (c) and non-coniferous fuelwood (N). In case of mul- ticollinearity variables were removed on a per-case basis (denoted as “-“). Significant elasticities are shown in bold. Owner- Own Avg. winter Fire-wood Storm Oil Dummy R2 Type Const. ship cons. temp. (°C+10) price (C/N) damage (C/N) price 2006-2015 (corr.) 1.27 C -25.11 .32* - 5.12 1.13 - .25** SPF (lag) N 8.37** - .17 1.19** - - .59** .73** C 3.55** - .05 1.78** .25** - .59** .84** LPF N 6.48** - -.04 1.92** .05 - .66** .90** .14 - C 3.24 - .16 2.27** .55** .74** (lag) STF .10 - N 2.34** - 2.91** - -.03 .70** (lag) C -.13 - .37 2.86** .31* - .90** .72** All N 9.16** - .16 1.87** 1.16 - . ,88** SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 69

DISCUSSION AND OUTLOOK help to managing the wood-based value chain with The magnitude of own consumption since respect to climate change mitigation. 2006 is not affected significantly by including FWC, while sales volumes are directly affected, because ACKNOWLEDGEMENTS fuelwood declared as FWC is mainly produced for The presented study is part of a project selling. supported by the “cooperation platform forest- Current statistics don’t allow for a separate wood-paper – working group energy” (FHP AK attribution of FWC and firewood to own Energie, project “Eigenverbrauch”), some data consumption (personal use) and sales. It is only from the project HoKoPo (B287609) funded by the possible to investigate the sum of these categories. Austrian Climate and Energy Fund has been used Thus, the increasing role of combined head power for this study. plants for the wood-for-energy sector since the mid- 2000 is not apparent, which could play an important REFERENCES role in the future (depending on future subsidy 1. BMNT - Federal Ministry of regulations on green electricity from wood-based Environment and Tourism. (2018). biomass). Holzeinschlagsmeldung über das Results show, that with increasing internal Kalenderjahr 2017. Vienna. use also the sales of fuelwood are increasing. The 2. Braun, M., Fritz, D., Weiss, P., Braschel, reason is currently not known and has to be further N., Büchsenmeister, R., Freudenschuß, A.,. investigated. . . Stern, T. (2016). A holistic assessment While no significant statistical relationship of greenhouse gas dynamics from forests between own consumption and sales of fuelwood to the effects of wood products use in could be found it was assured that own consumption Austria. Carbon Management, 7(5-6), is significantly responding to changes in fuelwood 271–283. https://doi.org/10.1080/1758300 prices in a negative and highly elastic way (C: -3, N: 4.2016.1230990 -2). High fuelwood prices lead to more sales and thus less own consumption while low fuelwood prices 3. Hogl, K., Pregernig, M., & Weiss, G. lead to lower sales and higher own consumption. (2005). What is new about new forest No significant relationship could be found owners? A typology of private forest between own consumption and winter temperature ownership in Austria. Small-Scale Forest (average temperature anomaly). According Economics, Management and Policy, 4(3), to an expert’s harvest decisions for wood for 325–342. own consumption are more based on adequate 4. List, J., Schwarzbauer, P., Braun, M., temperatures for harvesting and not for the need to Werner, A., Langthaler, G., & Stern, T. head (Nemestothy, pers. comm.). (2016). Naive wood-supply predictions: Large-scale storms affect own consumption Comparing two case studies from Austria. for coniferous fuelwood, while non-coniferous Austrian Journal of Forest Science, 133(2), wood is only marginally affected by wind throws. 87–110. Generally, wind throws only play a minor role for sales decisions (elasticities 0.1-0.3). 5. Schwarzbauer, P. (2007). Einflüsse von While some more research is necessary to Schadholzmengen auf Rohholzpreise. determine the effects of own consumption on Eine quantitativ-statistische Analyse am material use of wood, results presented in the study Beispiel Österreichs. Allg. Forst- U. J.Ztg., at hand will help to improve forest sector models 178(1), 1–8. by redefining supply curves (e.g. in the Austrian 6. Schwarzbauer, P., Huber, W., FBS- model “FOHOW”; Braun et al., 2016). This Stern, T., & Koch, S. (2012). Das makes it possible to further investigate dynamics Angebotsverhalten der österreichischen and interdependencies in the Austrian FBS and will Forstwirtschaft hinsichtlich veränderter 70 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Rahmenbedingungen - eine 8. Strimitzer, L., Höher, M., & Nemestothy, ökonometrische Analyse. Allg. Forst- U. K. (2017). Wood flows in Austria: J.Ztg., 183(3/4), 45–55. Reference year 2015. Retrieved from https://www.klimaaktiv.at/erneuerbare/ 7. Schwarzbauer, P., & Stern, T. (2010). energieholz/holzstr_oesterr.html Energy vs. material: Economic impacts of a “wood-for-energy scenario” on the forest- 9. ZAMG – Austrian Central Institution of based sector in Austria — A simulation Meteorology and Geodynamics. (2018). approach. Forest Policy and Economics, Klimatothek. Retrieved from www.zamg. 12(1), 31–38. https://doi.org/10.1016/j. ac.at/cms/de/produkte/nach-branchen/ forpol.2009.09.004 klimatothek_cyLEDGE SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 71

PRELIMINARY SURVEY RESULTS OF MEAT VALUE CHAIN ANALYSIS IN MONGOLIA

Nyamdorj Doljinsuren1a, Ariunbold Batkhuu1b, John Arnold2

1a. Independent Consultant 1b. School of Economics and Business, Mongolian University of Life Sciences [email protected] & [email protected]

Abstract The food and agriculture sector plays important role in Mongolia’s economic development accounting for about 36 percent of GDP, and 57 percent of employment (NSO, 2015). Since animal husbandry accounts for a large share of both production and labor, the government has been promoting the growth on exports of animal. In response to the government interest, the World Bank and International Finance Corporation funded a Trade and Transport Facilitation Assessment on value chains for meat, leather, wool and cashmere to identify opportunities for increasing these export. This survey involved 31 companies of which 8 were involved in exporting meat products. This article reviews the preliminary findings of this survey. Semi- structured interviews concerning the supply chains used for exports of meat products were conducted with the senior management including sales and finance. A comprehensive report of the trade, transport facilitation assessment is under a preparation. 2. A survey was advised by Dr. John Arnold, World Bank consultant.

Key words: inbound supply chain, outbound supply chain, suppliers, producers, buyers, shipment

INTRODUCTIONS According to the Mongolian Meat Association, a The Ministry of Foreign Affairs of Mongolia is total installed capacity of meat abattoirs is 6,142 interested in identifying constraints on the growth head of big animals, and 21,750 head of small in trade in agriculture products with particular animals per shift (8 hours) in the country. While emphasis on the role of the economic corridor in there have been increases in both livestock and facilitating this. In this regard, the World Bank and slaughtering capacity factory over the last few International Finance Corporation have conducted decade, the export of meat and meat product has a preliminary survey on the supply chains for meat, not kept pace. leather, wool and cashmere exports. This article discusses the findings for the supply chains used in METHODOLOGY the export of meat and meat products. Data was collected through interviews with businesses using semi-structured interviews PROBLEMS, CURRENT SITUATION with both closed and open-ended questions. The Mongolia produces 400 thousand tons of meat survey covered the following, (i) firm’s business annually (2016), of which 92 thousand tons is beef, model, (ii) supply chains from inputs to export, and 193 thousand tons is mutton and goat meat. The (iii) financial transactions and flow of information. amount of animals slaughtered has been growing Eight companies were studied between December since 1990s thanks to the growth in livestock. 2017 and January 2018.

Table 1: Survey sample size Sample Business fields Company size Integrated: from abattoir to meat processing 4 Makh Market, Makh Impex, Mongol Eco Makh, Darkhan Makh Integrated: from abattoir up to cut meat 2 Mongol Makh Export, Mon Tuva No abattoir, cut meat and packing 1 Mongol Food LLC Abattoir 1 Zavkhan Khuns LLC 72 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 A supply chain approach was used to analyze is decreased due to a market competition. (Onon, the performance of, transport and trade facilitation 2018). A few traders have more control on beef leg and identify bottlenecks in the flow of both inputs trades, which makes such inputs rare on a market. and outputs. Since the sample size was small, this (Khandsuren, 2017) survey output was primarily on a descriptive rather During a peak period of inputs supply, the than statistical. producers try to purchase and store large amount of inputs as much as possible, depending on their DISCUSSION financial and storage capacity. It is revealed from The Business model used by the companies the survey that the producers maintain an input involves the following activities running through inventory of 50-100% out of their annual production following ways in general: inputs (life animals in a peak period. In this period the producers draw or meat carcasses) are delivered by local traders, inputs almost every day. As informed, a price of brokers, slaughtering workshops, including herders inputs is fluctuated 30-50% between peak and (suppliers) to the companies (producers), who slack periods. The producers have storages with deliver meat and heat treated meats to foreign a capacity of 270-16,000 tons of meat. Storing wholesale traders, exclusive traders, and processing period of input is up to nine months for domestic factories (buyers) in abroad. Information that production. In most cases, the producers do not the producers receive concerning the inputs from maintain input inventory for a period of exporting, the suppliers are an origin location, veterinary in other words they produce and export directly. certificate, age of animals, size, quantity, price, and As reported by informants, a yield of the carcass is schedule. Buyer’s representative stays and controls 42% of life weight for small animals, and 45% for whole production processes during slaughtering till large animals, and meat yield of carcasses is 70- loading products on truck. The producer deliver to 80%, and 40% for heat-treated meat. the buyers a certificate of origin, and conformity, Due to pastoral livestock nature, a quality laboratory analysis and quarantine, and custom of inputs varies by seasons, so that livestock only clearance documents, abattoir information, record gains weight in autumn. As it is found, major of slaughtering, pre- and post- tests control, package, problems that affect to reliability of input supply are and quality. From the upstream of the supply chain, (i) seasonal supply, (ii) price fluctuation, and (iii) the buyers provide information on price, quality inconsistency of the quality. There are also some requirements, quantity, shipment schedule, and its other problems were mentioned by informants such representatives, a price, age, quality, quantity and as, financial deficiency, and outbreak of animal terms of payment to the producers. diseases. When there is an outbreak of diseases, Inputs. Goats, sheep, cattle, and horses are meat export is banned, which is considered a main main inputs. The producers buy life animals or problem for exporting companies. carcasses, depending on their supply/demand in A transfer of ownership of inputs is made market, diseases outbreaks, and requirements of at factory, except for two informants. The input exports. The producers interviewed collect inputs suppliers manage shipments in multiple rounds. from diseases free provinces directly or through Different kinds of trucks (small, medium and large local markets in Emeelt and Nalaikh of Ulaanbaatar. sizes) made in Korea, China or Russia is used for Delivery of inputs are made by suppliers mainly, shipment, and a delivery on foot is also used. As but sometimes it is done by producers. Among informed, the producers do not exactly know about input suppliers, Chinese traders are becoming a a cost of transportation, because a price of the strong market player. inputs is generally included transportation costs. Availability of the inputs varies by month by However it is informed that renting cost is 1-1.7 month, and a season to season. It is found that a million MNT for a large size trucks, and 0.7-0.8 slack period of the inputs is March and May of a million MNT for medium size trucks. A size of year, which could also be expand from February shipments ranges widely as shown on below table. to June by certain producers. When animals got A time spent from an order to factory storage was fattened, a shift of inputs to a market grows up, vary up to four months. at the same time, sometimes; availability of input SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 73

Table 2 Shipments of inputs Timing between Size of a typical Input delivery from the order Company Transport means the shipments in a shipment to the company peak period 6-70 cattle 2-7 days, 1 Different size trucks Up to 4 months 30-300 lamb Everyday 30-250 sheep 2 Different size trucks Everyday Varies 4-50/100 horses By truck 10 days On foot, Different 30-60 big animals, On foot 14-20 days for big 3 Everyday size trucks 100-1000 small animals animals, 5-7 days for small animals 5-100 horses, 4 Different size trucks 100-1500 sheep, Everyday 15-20 days on foot 3-15 tons of beef 60-100 horses On foot, Different 5 (peak) Everyday 30 days size trucks 10-30 horses On foot, Different 6 On foot 70% Weekly 14 days size trucks Different trucks, 7 2 tons Weekly 1 day Haais Different trucks, 20-40 tons, 2-4 8 Everyday 7-10 days Volvo tons

Processes. The producers interviewed produce products limited to mostly trade bans. Main carcass, sorted, and heat-treated meats. The country for export is China, Russia, Kazakhstan, producers of the same group use almost the same Iran, and Qatar. As said by informants, the buyers technological processes. A period of production is are the exclusive buyers, foreign wholesale up to nine months except for heat treatment process. distributors, and factories, who are a few large in Production varies by seasons and by years, due to terms of quantity. A product sale is managed by the availability of inputs, export demands, and trade the producers. A delivery of the product is made bans. As informed, main causes of such variations by shippers or producers themselves. It is said are the availability of inputs. Other causes are the that a form of communications for confirmation of problem with logistics, global production, and orders is a signed contract and advance payments. regional or global market conditions, and style of Reasons of not selling products to final consumers the pastoral animal husbandry. are because of (i) deep processing requirements, Products. Interviewed companies export (ii) various controls, traceability record, and (iii) no carcasses, sorted, boneless, and heat-treated meat. contracts, size of order, and long payment duration. The products are exported directly from production An ownership of product is shifted at ex- without inventory. A quality of products much factory, on board, and loading port. Shipment of depends on seasons; a slaughtering is typically products is very much depends on foreign trade made after animals got fattened in in autumn ban and availability of inputs. A main type of route through earlier winter. The producers assume that mode is roads, but also uses rail, and air. Export their product is differentiated by factory name products are transported with refrigerated TIR (brand), packaging, quality and size. As reported, truck. The modes of transportation is selected based companies have internal and external laboratory on available routes, cost, and buyer’s choose. controls, while the buyers do control a whole Documentations such as sanitary certificate, production processes. A truck with a refrigerator is certificate of origin, conformity certificate, much required for shipments. certificate of quarantine, and custom declaration Outbound supply chain. The producers are required for export products, which collected interviewed export a majority amount of their by producers themselves commonly. For taking 74 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 a laboratory test analysis and working with the A bank mortgage is an immovable property. Professional State Inspection Agency, needs more Commercial banks offer the loans for current times than others. Interviewed expressed that assets, investments, equipment, projects, and small an inspection time should be coordinated by the businesses. Payment of the products is mainly made inspectors of professional inspection and customs, in different periods. A form of the product payment in order to make them inspect the products in parallel is bank transfer. in terms timing. Currently, the producers spend a The producers responded that a typical maximum seven days for overall inspections. There financial risk of their current business is fluctuation is no difficulty for producers to obtain information in demand and prices, and shortage of working about regulations and procedures related to capital. licenses, permits, certification, standards, and customs service in Mongolia. Required information CONCLUSIONS is collected from authorities, internet websites, and Constraints in the inbound supply chain freight forwarding agency. include (i) outbreaks of disease, (ii) limited financial Market Information. The producers resources, (iii) seasonal variation in availability responded that they collect information on foreign of inputs, (iv) Requirements for special forms of markets about preferences in quality, appearance, transport, and deterioration in road conditions. The processing, quality and availability of inputs, constraints in the outbound supply chain include processing technology, price, and growth in (i) access to certified inspection facilities, (ii) demands. They collect such information from uncertainties of the results of laboratory analyses in catalogues, newsletters, internet, trade fairs, China, (iii) limited quotas and fluctuation in prices associations, business trips, chamber of commerce, and tariff in Russia. personal contracts, buyers, and diaspora as well. The most important improvements that are Important source of the information on foreign trade required include (i) increasing the reliability of is the buyers and former partners. The producers supply of inputs, (ii) improving roads in order to collect this information of 3-10 countries such as reduce the cost and time for delivery of inputs and Iran, Qatar, Bahrain, China, Russia, Kazakhstan, products by further, (iii) improved control of animal Uzbekistan, Azerbaijan, Vietnam, Hong Kong, and health, (iv) availability of transport for shipment Korea. Foreign buyers visit to the producers looking of inputs and products, (v) coordination between for opportunities on meat trades. The producers certification and custom inspections, and (vi) loan expressed that they are interested in opening new to producers on favorable terms. markets and new products. Important markets are highlighted China, Russia and Middle East REFERENCES countries, and interests of buyers of other countries 1. TTFA for Mongolia agricultural exports: in meat trade are emerging. survey of selected meat Companies, 2018. A price of inputs is defined based on markets 2. Ministry of food, agriculture and light of Ulaanbaatar. Advance payment of the input was industry,2018, http://mofa.gov.mn/exp/. not common, except for one producer. Payment is 3. Agricultural value chain finance, Tools made to input suppliers when the inputs shipped to and lessons, Calvin Miller and Linda a factory, and a last payment is made in few days Jones, 2010. after storage. Sources of fund for purchasing of 4. Value chain training, November 2018, inputs is own cash of the producers. Some use a Ulaanbaatar, Mongolia. credit of buyers. A letter of credit is rarely used. 5. National statistical yearbooks of Mongolia Bank loan has high interest rate of 1.8-2.4% for 2010,2013,2016. 12-36 months, which is not favorable to producers. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 75

EFFECT OF RURAL LABOR FORCE PREFERENTIAL TRANSFER ON AGRICULTURAL TECHNOLOGICAL PROGRESS

Wang Chunzhi, Zhao Lei , Bao Wenjin (Department of Statistics and Mathematics, Inner Mongolia Finance and Economics University, Hohhot 010070 ,China)

Abstract: This paper focuses on the response relationship between labor force preferential transfer and agricultural technological progress, namely by evaluating the impact of the loss of rural labor force quantity and quality on agricultural technological progress. Positive and negative effects of labor force preferential transfer are analyzed using the equilibrium analysis method and two-sector model. Hypothesis testing, double logarithmic linear regression, and logistic regression are applied to sample of 462 farmers to analyze differences in technical choices of the agricultural labor force.Results show that the preference of labor force transfer will increase the expected income standard of new technologies adopted by farmers, and will lead farmers to choose technologies and innovation that requires less labour force.Moreover, it will also promote the deepening of human capital of the left-behind labor force. there are differences in the influence of same factors on different kinds of agricultural technological demands.

Keywords: labor force; preferential transfer; agricultural technology progress; effect; equilibrium analysis; technical choices; human capital; two-sector model; allocation structure; agricultural industrialization

INTRODUCTION contrast to the 49.38% in the non-transferred China’s State Statistical Bureau released a rural labor force. The labor force related to non- survey report monitoring migrant workers since agricultural transfer was clearly popular, indicating 2008. Data revealed that the total number of migrant the transfer of a predominantly male, young, and workers in China was 225,420,000 in 2008 and highly educated high-quality labor force, which has has increased annually and reached 281,710,000 contributed to a female and aging rural labor force in 2016, an increase of 24.97%, with an average by comparison. annual growth rate of 2.83%. The number of According to statistics, China’s urbanization migrant workers leaving their hometown increased rate has increased by 1 percentage point, about 12 from 140,410,000 in 2008 to 169,340,000 in 2016 million farmers have relocated to towns, and at least with an average annual growth rate of 2.37%. RMB 240 billion invested in human capital has Large-scale labor force transfer and employment been taken away from the countryside[1]. As such, has contributed substantially to optimization of the the question of “Who does farm work?” remains industrial structure, acceleration of urbanization, important. With a dual loss in labor force quantity and economic growth; these trends have and quality, China’s gross agricultural product compensated for labor shortages during urbanization has continued to rise at an annual average growth and industrialization while exerting a profound rate of 19.78% since the reform and opening up. impact on the countryside. Demographically, the Human capital is an endogenous growth source. In proportion of male migrant workers reached 65.5% the context of the Lewis turning point, which has in 2016; the average age of migrant workers was aroused concern in people from all walks of life, 39 years, and the proportion of young and middle- the impact of the loss of rural human capital on aged workers under 40 was 53.9%. Among migrant agricultural technological progress (taking labor as workers who transferred their employment, the a carrier) is a question undoubtedly worth exploring. proportion possessing an education level of junior middle school and above is 84.9%, stood in sharp 76 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

LITERATURE REVIEW Some researchers believe that the preferential Labor force transfer in China has attracted transfer of agricultural labor force has improved close attention. Drawing from Lewis’s labor the quality of agricultural labor, accelerated the transfer theory, early studies were based on the formation of human capital, and promoted farmers’ homogeneity hypothesis of the rural labor force. technological progress in agricultural production; Some people contended that the labor force hence, they argue that merit-based transfer has not involving non-agricultural transfer belonged to the affected the efficiency of agricultural production. surplus labor force with zero marginal productivity Foreign scholars such as Ngai (2007) [12], Singh et in agricultural sectors; hence, transfer employment al, (1986) [13], and Juna Miluka (2010) [14] claimed was thought not to affect agricultural output [2]. that technological progress changed the allocation Others argued that although labor force transfer proportion of the labor force in the social sector employment has reduced the agricultural labor and improved the marginal productivity of the force and exerted a direct negative impact on agricultural labor force. In domestic research, agricultural production superficially, Given the role Jianxiong (2011) asserted that preferential transfer of agricultural technological progress, however, of the labor force has promoted the transformation a decrease in the agricultural labor force has not of agricultural resource structures and the evolution actually had any negative effects on production [3][4]. of agricultural technology from labor quantity In recent years, scholars have begun to pay embodiment to material capital embodiment and attention to the heterogeneity of the labor force and generalized capital embodiment [15]. Taking Gansu relevant trends in the transfer process to assess its as the research object, Xiaolin, Yiqing, Fansheng, impact on agricultural technological progress. Some and others (2012) found that the number and degree researchers believed that the merit-based transfer of education of agricultural practitioners had no of the labor force has had negative effects on significant effect on agricultural production, but agricultural technological progress. Jintao and Chao their constraining effects would gradually become (2009) [5] contended that the preferential transfer of prominent in the long run [16]. Zhilei and Jia (2013) the family labor force reduced farmers’ demands thought that the outgoing experience of the rural for agricultural technological progress. Min and labor force, especially the working experience Liange (2010) [6] believed that “feminization” and of technicians, affected agricultural production “aging” led to a decline in the overall quality of the and exerted a significant impact on farmers’ agricultural labor force; the original agricultural adoption of technology, which could promote production mode of intensive and meticulous the dissemination of agricultural production farming was gradually replaced by “lazy technologies and acquisition of non-agricultural agriculture”, which was not conducive to sustainable skills [17]. Taking the technical efficiency of grain agricultural development. Xibao and Can (2010) [7] production as an example, Daiyan and Le (2015, analyzed the consequences of extensive agricultural 2016) proved that the aging and feminization of the production and the inefficiency introduced by the rural labor force improved the technical efficiency preferential transfer of the agricultural labor force. of grain production, although the contribution of Xiaolin et al. (2011) asserted that the shortage of feminization was declining [18] [19]. Aimin’s study human capital necessary for modern agricultural (2015) revealed that farmers’ adoption of new production would inevitably become a bottleneck technologies stemmed from the induced force restricting China’s continued agrarian development arising from labor force transfer, but the effect of [8]. Zhihai et al. (2014, 2015) found that the higher induced force was influenced by the information a farm worker’s age, the lower his or her farmland level, technology services, degree of farmers’ utilization efficiency and, by extension, the lower organization, and human capital level [20]. the agricultural technical efficiency [9] [10]. Zengfu The above studies provided mostly empirical (2016) noted a significant negative effect of an results from a micro-perspective, research was inexperienced labor force on the improvement of carried out using survey data from household household production efficiency [11]. samples with a focus on the influence of family labor force transfer on agricultural production. Based SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 77 on theoretical analysis from a macro-perspective obtains income from non-agricultural employment and empirical research from a micro-perspective, channels. Resource allocation will then be further this paper focuses on the response relationship optimized, and the isocost line will move in parallel between preferential transfer of the labor force to K1L1 relative to K0L0’. The tangent point of equal and agricultural technological progress. The yield thus changes to Point F, and the farmers’ present study seeks to shed light on how to realize material capital investment increases from the KE and promote agricultural technological progress unit to KF unit while the labor input declines from under the backdrop of the dual loss of labor force LE to LF. After labor force transfer employment, quantity and quality to provide useful insights for the household income increases and the density of policymaking. the agricultural labor force decreases. However, more material capital can be invested to purchase EFFECT OF AGRICULTURAL technical products and services, and agricultural TECHNOLOGICAL PROGRESS ON output remains unchanged or may even increase. PREFERENTIAL TRANSFER OF THE LABOR FORCE Promoting greater human capital in the Labor force transfer preferences exert non-transferred labor force significant positive and negative effects on It is important to identify influential agricultural technological progress. mechanisms on human capital in the agricultural sectors of the preferential transfer of labor force. Accelerated technological progress of As suggested by Stark and Wang [21], a two-sector material capital embodiment model can be established under the following Under the condition of a relatively inadequate conditions: agricultural labor force, technological adoption (1) The economic system consists of two and innovation prevail in the agricultural labor sectors: the traditional agricultural sector and the economy; most often, power machinery is used non-agricultural sector; the flow of labor force to replace the labor force. Taking a single-farmer between these two sectors can present technical family as an example, if family members have barriers without policy ridges. no non-agricultural transfer and engage in low- (2) The agricultural labor force is divided into yield traditional agriculture for a long time, a low-quality labor force and high-quality labor it becomes difficult to accumulate the capital force, the latter of which aligns with the employment necessary to purchase technical elements or service conditions of the non-agricultural sector. investments; this situation leads to a surplus labor (3) The technology level and production force in agriculture and extremely low marginal efficiency of the non-agricultural sector exceed labor productivity. As illustrated in Figure 1, the those of the agricultural sector, which attracts family pursues the maximum yield under a fixed agricultural labor force transfer employment. cost. Without labor force transfer, the isocost line (4) The value of human capital in the non-

K0L0 of the household and the isoquant line EF are agricultural sector, which is consistent with that in tangential at Point E. At this time, the combination the agricultural sector, is neither appreciated nor of the input elements of farmers’ production is depreciated. the KE unit (material capital) and LE unit (labor). (5) The return rate of human capital in the Farmers are hence more willing to allocate non- non-agricultural sector is higher than that in the scarce labor to production due to scarce capital. agricultural sector. The non-agricultural transfer of the rural The number of workers in the low-quality and surplus labor force has led to a corresponding high-quality labor force in the agricultural sector reduction in the density of the agricultural labor are denoted as N and N respectively; h and h 1 2 , 1 2 force. In this case, if the isocost line K0L0 rotates represent the respective human capital in each labor counterclockwise from Point 0 to K0L0’ with force; and k1 and k2 indicate the costs obtained an unchanged capital input level, families’ total by each form of human capital. In the absence of production capital will increase after the farmer non-agricultural transfer, the output fh() can 78 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 be regarded as the function of human capital h for individuals in the labor force. During non- Nh11′′+−(1 p ) Nh2 2 hα = (4) agricultural transfer, its form is fh( )=+α ln( h 1) N12+−(1 pN ) , where α indicates the return of labor force capital.

The labor force complies with the principle of net 1/− kk21 When hhα > or p <− 1 , income maximization when the human capital (βα /−+ 1)(1NN21 / ) decision is made so that w( h )=α ln( h +− 1) kh is largest. When the derivative of the income function the labor force preference transfer increases the is sought, the obtained optimal level of human average human capital stock of the agricultural capital selected by the labor force is labor force. Then, agricultural labor force transfer towards the non-agricultural sector urges farmers to ′ hkii=α −>1 0 , i = 1, 2 (1) invest money in human capital and deepen the human capital of the non-transfer labor force, thus In the absence of non-agricultural transfer, the realizing agricultural technological progress. average level of human capital in the agricultural The loss effect of agricultural human capital, sector is caused by labor force preferential transfer, will

22 also produce human capital accumulation. The h= ∑∑ Nhii N i impact of the former is immediate, whereas the ii==11 latter occurs over a longer period; therefore, the loss rate of human capital in the agricultural sector The labor force output in the non-agricultural will be larger than the human capital accumulation sector is its total income, fh( )=β ln( h ++ 1) E, rate during the early period of labor force transfer, given a non-agricultural transfer in the agricultural leading to a decline in the quality of non-transfer sector of which β is larger than α ; in this case, agricultural labor force qualit y. the rate of return of human capital in the non- agricultural sector is higher than that in the Improve expected income standards for agricultural sector. When E ≥ 0 and is a constant, new technologies adopted it indicates a strengthened income factor in the non- agricultural sector that does not belong to the human If the acceleration of material capital capital of the non-labor force but instead represents accumulation and the deepening of human the external or welfare benefits of human capital. If capital are the embodiment of positive effects of the probability of labor force transfer employment agricultural labor force preferential transfer, then is p , the expected net income is improving the expected return standard of new technologies adopted is the embodiment of negative w( h )= p[βα ln( h ++ 1) E] + ln( h +− 1) kh (2) effects. In the case of non-agricultural transfer, household concurrent occupations have become a When the derivative of Eq. (2) is sought, the main characteristic of agricultural production. The obtained optimal level of human capital selected by labor force flow has provided farmers a legitimate the labor force is choice between agricultural production and non- p(βα−+) α agricultural production; farmers should consider h′ =−1 (3) the expected income and costs of new technologies k and compare them to non-agricultural production profit when selecting such technologies. If farmers The emergence of transfer opportunity p and cannot carry out non-agricultural transfer, the labor higher wage income β ln(hE++ 1) compels the force in agricultural production will not be reduced second kind of labor force to form more human ,given the low income standard expected by farmers capital; therefore, the average human capital level regarding new technologies and farmers’ strong of the labor force in the agricultural sector is willingness to adopt such innovations. Therefore, SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 79 agricultural output can be guaranteed even if regression model to evaluate farmers’ expenditures economic incentive policies are not implemented. on agricultural production, which takes the Consider a household with facultative amount of farmers’ expenditure on purchasing production where the income of the per-unit labor technical factors or technical services (Y) as the force engaged in non-agricultural production is dependent variable. The following are independent larger than that of agricultural production with variables: M is the amount of time the per capita reduced labor force flow constraints. Under these (non-agricultural) labor force engages in a non- conditions, the labor force opportunity cost of new agricultural industry, measured in months; S is technologies expands, and farmers can increase the actual household acreage under cultivation; N their income requirements when choosing new is the per capita years of schooling of the transfer technologies to enhance agricultural production. labor force; and L is the age of the main labor force In other words, they will raise the threshold. engaged in agricultural production. Data used in Compared with a scenario in which the labor force this research were gathered from a study on farmers cannot flow, the willingness and potential to adopt in Inner Mongolia from January 2015 to March new technologies will decrease. Therefore, as long 2015. Sampled farmers met typical conditions for as the rate of return of non-agricultural production engaging in agricultural farming, and 462 valid is larger than that of agricultural production, questionnaires were obtained. household agricultural labor input will inevitably The regression results obtained using SPSS decline. The agricultural wage rate of farmers with software were as follows: a large endowment and human capital is far below lnY= 0.62+0.13ln M +0.91ln SNL -0.04ln -0.35ln the non-agricultural wage rate, and their income (3.90) (11.85) (6.31) (-8.17) (-2.57) (5) from non-agricultural production is far larger than RF2 ==0.99 270.65 that from agricultural production. On one hand, they do not contribute to the agricultural production Eq. (5) indicates that under the 95% confidence labor force; on the other, they do not invest money level, this model passed the goodness-of-fit test in agriculture. Their investment in new agricultural and significance test according to the regression technologies thus declines accordingly, potentially equation and regression coefficient. Results indicate culminating in land abandonment. For farmers that when the time during which the per capita without a substantial endowment and human (non-agricultural) labor force was engaged in a capital, facultative production is still their best non-agricultural industry increased by 1%, farmers’ option as long as the wage rate of non-agricultural technical purchase expenditures increased by production is inconsistent with that of agricultural 0.13% on average. This trend implies that farmers’ production. Farmers generally choose to engage in adoption of technology requiring less labour force nearby non-agricultural production and increase the is promoted by a reduction in the time for which use of new technology in agricultural production. the household labor force engaged in agricultural As the gap between agricultural and non- production.When the actual acreage under agricultural wages narrows, the opportunity cost of cultivation increased by 1%, farmers’ technical agricultural production and the income expectation purchase expenditures grew by 0.91%. The actual from adopting new technologies decline. Farmers’ household acreage under cultivation and time for willingness to adopt new technologies should which the household labor force was engaged therefore increase the presence of agricultural in a non-agricultural industry showed a positive innovations. correlation with farmers’ technology expenditures. Farmers tended to increase their income after EMPIRICAL ANALYSIS BASED ON engaging in non-agricultural production, therefore, FARMERS’ SAMPLE DATA the opportunity cost of engaging in agricultural Farmers’ adoption of new agricultural production increased, and farmers used economic technologies is primarily realized by purchasing labor technology to compensate for the shortage technical production factors and technical services. of labor input in agriculture production. Non- This paper establishes a double logarithmic linear agricultural income justly provided farmers with 80 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 capital requirements to acquire technical elements when the age of the primary labor force engaged in or services. When the per capita years of schooling agricultural production increased by 1%, suggesting of the transfer labor force increased by 1%, the that the agricultural labor force has a negative effect average reduction in farmers’ expenditures on on agricultural technological progress in terms of technical purchases was 0.04%, indicating that age. higher-quality transfer employees can derive Furthermore, this paper used hypothesis greater benefits from non-agricultural production. testing to conduct an independent-sample t-test They are therefore unwilling to contribute to labor on the gender of the main labor force engaged in agricultural production and invest money in in agricultural production and expenditures on such production. The average farmer’s expenditure agricultural technology purchases1; results appear on technical purchases also decreased by 0.35% in Table 1.

Table 1. Independent-sample t-test Levene test of homogeneity of variance T test of mean values Mean F Sig. t df Sig. difference Equal variances assumed 0.717 0.398 -12.371 460 0.000 -38.606 Equal variances not assumed -12.424 386.765 0.000 -38.606

The homogeneity test of variance revealed age (X1), householder’s gender (X2; female = no significant difference between genders in 0, male =1), householder’s years of education the agricultural labor force in terms of technical (X3), family’s annual non-agricultural income purchase expenditures; the statistical result of this (X4), actual acreage under cultivation (X5), non- t-test was -12.371, and the corresponding statistical agricultural payroll employment (X6), number significance was less than 0.05 at a 95% confidence of family members (X7), and household transfer level. A notable gender-based difference existed employment (X8; non-transfer =0, transfer =1). Eq. in technical purchase expenditures, with men’s (6) was conducted according to the survey data; average expenditure costing RMB 38.606 more considering that the cross-sectional data model may than that of women. have heteroscedasticity, Logarithmic processing

Next, this study used a multinomial logistic was carried out on X1, X3, X4, and X5; results are regression model to study the impact of labor shown in Table 2. force preferential transfer on different agricultural In terms of household characteristic variables, technological demands. The specific model is as compared with postpartum processing technology, follows: the householder’s age had a positive correlation with farmers’ technical demands. With an increase π j logit =ααj + j11x + α j 2 x 2 ++... αjn x n , j ∈( 1,2,..., ii − 1, − 2,..., m) π i (6) in the householder’s age, the household demands for fine varieties and cultivation techniques, disease In Eq. (6), usually im= or 1, and and pest control technology, and fertilization ∑(ππji+= )1. In this paper, the dependent variable technology increased significantly. However, is agricultural technological demands (fine varieties this feature was not reflected in the demands for and cultivation techniques =1; disease and pest agricultural machinery use technology. A negative control technology =2; fertilization technology effect and positive effect influenced demands for =3; agricultural machinery use technology =4; fertilization technology and agricultural machinery postpartum processing technology =5). The use technology respectively, that is, the male independent variables include householder’s householder’s demands for fertilization technology

1 The gender of the main labor force engaged in agricultural production is a qualitative variable; thus, hypothesis testing was adopted. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 81

Table 2. Regression results of the agricultural technological demand model Independent Fine varieties and Disease and pest Fertilization Agricultural machinery use variable cultivation techniques control technology technology technology * * * lnx1 0.67 1.23 2.09 1.89 * * x2 0.12 -0.33 -0.66 -0.32 * lnx3 0.03 0.54 0.41 0.36 * * * lnx4 -0.39 0.28 0.47 -0.21 * lnx5 0.06 -0.12 0.57 -0.24 * * * x6 -0.65 -0.78 -0.46 0.18 * x7 0.34 0.11 -0.34 -0.30 * * X8 0.26 0.01 0.17 0.24 C 0.76* 0.24* 1.27 2.31 Note: the regression coefficient marked by “*” indicates that it is significant under the 95% confidence level. were significantly lower than that of the female significant impact on the demand for agricultural householder, while the demands for agricultural machinery use technology.These findings indicate machinery use technology were significantly that the population effect of labor force transfer greater than that of the female householder. occurred alongside an increase in the amount of The householder’s years of education exerted a household transfer employment. A decline in the significant positive effect on demands for agricultural number of the agricultural labor force resulted machinery use technology but no significant impact in less household demand for new technologies. on demands for other technologies. The larger the In addition, the use of agricultural mechanized family, the more the householder tended to adopt equipment showed a relatively high demand for fine varieties and cultivation techniques. Theactual labor force quality. When a large proportion of household acreage under cultivation had a positive the young and middle-aged labor force stopped impact on fertilization technology demands working, farmers were less likely to purchase or but no significant impact on demands for other update agricultural machinery. technologies. From the point of view of labor force transfer, CONCLUSIONS compared with the situation of the householder’s The above analysis demonstrates that labor non-transfer employment, household transfer force transfer preference has two positive effects employment demonstrated a more significant and one negative effect in terms of agricultural demand for fine varieties and cultivation techniques technological progress. One positive effect is and fertilization technology; no obvious demands the induction effect on household adoption of existed for other technologies. Non-agricultural economic labor technology and innovation, family income had a negative impact on fine another is the human capital deepens effect of varieties and cultivation techniques and agricultural the left-behind labor force in the long run. The machinery use technology. The higher the non- negative effect increases the opportunity cost of agricultural income, the more farmers tended to the agricultural labor force engaged in agricultural reduce the adoption of fine varieties and cultivation production so as to improve the expected income techniques and agricultural machinery use standard of new technologies adopted by farmers technology. The adoption of fertilization technology when the non-agricultural wage rate exceeds the also increased. The number of non-agricultural agricultural wage rate. This empirical study of employment members brought significant negative farmers revealed that household expenditures on effects on the demands for fine varieties and technologies was positively correlated with the cultivation techniques, disease and pest control time for which the household labor force engaged in technology, and fertilization technology but no the non-agricultural industry and the actual family 82 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 acreage under cultivation, but it was negatively level agricultural professional and technical correlated with per capita years of schooling and personnel and skilled agricultural technicians,these household labor force transfer employment. The workers can greatly improve the income level logistic regression model indicated that the same of agricultural production and management. In variables exerted different impacts on demands for addition, measures should be taken to stimulate new diverse agricultural technologies, and the degree vitality in rural economic and social development of household labor force transfer and household to the maximum extent possible. Promoting a characteristics differed in their directions and sound, well-coordinated market of rural production degrees of influence on different types of technical elements and a labor force with high human capital demands. to engage in farm work in rural areas will enable a These research conclusions have certain weak rural industry to become strong. policy implications. The preferential transfer of the agricultural labor force may encourage farmers to REFERENCES adopt economic labor technology, which decreases [1] Han Jijiang, Kong Xiangzhi. Discussion the labor force and increases modern production on the negative effects of the urbanization elements. Transfer can also optimize the allocation process on the rural economy [J]. Issues structure of agricultural production elements and in Agricultural Economy, 2001 (7): 26-30 raise the marginal household output level. With [2] Lewis. W. A.. Economic development with technological advances in chemical fertilizer, unlimited supplies of labor. Manchester pesticides, and material capital skewness, the benefits school of economics and Social Studies of agricultural production have become gradually [J].1954(35):45-72 saturated. Sustainable agricultural development in [3] Scott Rozalle, J.Edward Taylor, Alan the future depends on the technological progress deBrauw. Migration, Remittances, and of human capital skewness and skill skewness; Agriculture Productivity in China[J]. The therefore, in the case of massive labor force American Economic Review, 1999(2): transfers, especially of the young and middle-aged 287-291 labor force, future agricultural development should [4] Wang Wei. Analysis on the impact of focus on cultivating high-quality farmers. First of rural labor transfer in Hubei Province on all, favorable conditions are necessary to cultivate the agricultural productivity [J]. Chinese and strengthen new modern peasant groups and Agricultural Resources& Regional support migrant workers with certain skills and Planning, 2016, 37 (7): 182-185 capital to conduct business at home. It is especially [5] Zhang Jintao, Chen Chao. Analysis on important to provide multifaceted support to those the influence of labor force transfer on participating in agricultural-scale planting and farmers’ agricultural technology choices - breeding at home. The entrepreneurial spirit and based on farmers’ micro-data in China [J]. organizational management abilities acquired from Chinese Rural Economy, 2009 (3): 75-84 non-agricultural production place these individuals [6] Li Min, Zhao Liange. Empirical analysis among the best migrant workers, which solves on the influence of rural labor force flow the problem of having no qualified successors in on the aging of agricultural labor force - agricultural production. This situation can also inject based on Liaoning Province [J]. Chinese new vitality into rural and agricultural development Rural Economy, 2010 (9): 68-77 by helping local farmers eliminate poverty and begin [7] Guo Xibao, Huang Can. Lewis model, to accumulate wealth. Second, agricultural science labor heterogeneity and selective transfer and technology training is involved in agricultural of China’s rural labor force [J]. Henan industrialization for non-transfer farmers, namely Social Sciences, 2010, 18 (2): 64-69 agricultural production technologies and operating [8] Wen Xiaolin, Zhuang Yiqing, Zhang management technologies. The purpose of training Yujun. Discussion on the agricultural is to cultivate more professional technical talent as development under the selective transfer well as to develop many junior- and intermediate- of rural labor force - based on the Ranis- SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 83

Fei model [J]. Journal of Shandong University of Economics and Law, 2013 Agricultural University (SOCIAL (2): 48-56159 SCIENCE), 2012,11 (3): 21-24,119 [18] Peng Daiyan, Wen Le. Structural changes [9] Yang Zhihai, Meerdan Tursun, Wang in the rural labor force and technical Yapeng. Empirical analysis on the impact efficiency of grain production[J]. Journal of the aging of rural labor force on of South China Agricultural University agricultural technology efficiency - based (SOCIAL SCIENCE EDITION), 2015, 14 on CHARLS2011 [J]. Soft Science, 2014, (1): 92-104 28 (10): 130-134 [19] Peng Daiyan, Wen Le. Does the aging [10] Yang Zhihai, Li Peng, Wang Yapeng. and feminization of rural labor force Influence of the aging of rural labor force reduce the grain production efficiency - on farmers’ farmland utilization efficiency comparative analysis of South and North [J]. Areal Research and Development, based on random frontiers [J]. Journal of 2015, 34 (5): 167-171 Agrotechnical Economics, 2016 (2): 132 [11] Yao Zengfu, Liu Xin. Influence of the to 144 rural labor force quality on the production [20] Wang Aimin. Labor force transfer, efficiency of scale farmers [J]. Chinese adoption cost and farmers’ adoption Agricultural Resources& Regional of new technologies. Journal of Agro- Planning, 2016, 37 (3): 135-142 Forestry Economics and Management, [12] L. Rachel Ngai, Christopher A. Pissarides. 2015, 14 (3): 302-308 Structural change in a multi-sector model [21] Stark. O., Yong Wang. Inducing human of growth [J]. The American Economic capital formation: migration as a substitute Review, London School of Economics , for subsidies [J]. Journal of Public 2007,97(3):429 - 443 Economics, 2002(86):29-46 [13] Singh. I.. L. Squire. and J. Strauss. Agricultural household models - Extensions, Applications and Policy.[M]. Baltimore:The World Bank and the Johns Hopkins University Press, 1986:17-47 [14] Miluka, J.The vanishing farms? The impact of international migration on Albanian family farming.[J] . The Journal of Development Studies, 2010 ,46( 1 ) : 140-161 [15] Guo Jianxiong. Agricultural technological Figure 1. Labor force transfer compels farmers to progress under the selective transfer adopt economic labor technologies of labor force [J]. Guangdong Social Sciences, 2011 (6): 59-65 [16] Wen Xiaolin, Zhuang Yiqing, Fu Fansheng et al. Empirical analysis on the impact of the selective transfer of labor force on agricultural production - based on the time series data from1990 to 2008 in Gansu Province [J]. Journal of Shanxi Agricultural University (SOCIAL SCIENCE EDITION), 2012, 11 (1): 61-66 [17] Shi ZhiLei, Wang Jia. Outgoing experience and acquisition of new technologies of rural labor force [J]. Journal of Zhongnan 84 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

ADVANCED THERMAL-PRODUCTION AND TRANSPORT TECHNOLOGIES WITH BIOMASS TO PREVENT CLIMATE CHANGE

Shuichi Torii Faculty of Advanced Science and Technology, Kumamoto University TEL&FAX: +81-96-342-3756, E-Mail: [email protected]

The aim of the present study is to introduce the thermal production from the biomass, the heat exchange of its production to the working fluid, and higher effective thermal fluid transport. It is found that (i) the self-combustion takes place less than 40% of the compost’s moisture content and the high-temperature combustion gas over 1100K is able to be produced under the optimum air-fuel ratio, (ii) overall heat transfer coefficient for herring-bone plate is higher than the other of plate shapes and an amplification of frictional pressure drop is substantially suppressed for the separate herringbone plate, and (iii) enhancement of convective heat transfer performance is caused by suspending nanoparticles in pure working fluid.

Keywords: Biomass, Thermal Production, Plate Heat Exchanger, Nanofluid, Combustion, Convective Heat Transfer, Heat Transfer Enhancement

INTRODUCTION mixture with its continuous phase being generally Biomass is a renewable energy source because a liquid and the dispersed phase constituted the energy that it contains comes from the sun. of ‘nanoparticles’ i.e., extremely fine metallic Through the process of photosynthesis, chlorophyll particles of size below 100 nm. In other words, the in plants captures the sun’s energy by converting large surface-area-to-volume ratio also increases carbon dioxide from the air and water from the the stability of the suspensions. Thus, the nanofluid ground into carbohydrates, complex compounds becomes a new promising heat transfer fluid in composed of carbon, hydrogen, and oxygen. When a variety of application cases. For example, the these carbohydrates are burned, they turn back into thermal properties of such a nanofluid appear to be carbon dioxide, a greenhouse gas and water and well above those of the base-fluid and particularly, release the sun’s energy they contain. The thermal the suspended nanoparticles remarkably increase production is transferred to the other material, i.e., the thermal conductivity of the mixture [2,3] and the working fluid through the heatexchanger . improve its capability of energy exchange. Plate heat exchanger (PHE) which is employed In the preset study, the thermal production, i.e., as evaporator and condenser, is widely used in many high-temperature combustion gas from the biomss, industrial applications, because its performance is its heat exchange to the working fluid, and higher comparatively higher among the existing various efficiencythermal fluid transport are described. heat exchangers. Heat transfer performance of PHE is enhanced by using turbulence promoters EXPERIMENTAL APPRATUS AND in channel because of amplification of turbulence, EXPERIMENTAL METHOD while substantial increase in frictional pressure Combustor and its system for biomass: drop causes. Thus the plate surface patterns in PHE The combustion system which is consisted are required to promote heat transfer performance of feeder, combustor, heat exchanger, cyclone and simultaneously to suppress the frictional separator and measurement devices, is shown in pressure drop. The thermal fluid exchanged by the Fig. 1, and the corresponding photograph is depicted heat exchanger is efficiently transported to the other in Fig. 2. Unused biomass and air are fed by the place through the channel etc. forced draft fan and the biomass is combusted in the Fluid including nanoparticles is referred to combustor. The hot combustion gas produced in the as nanofluid, which is a term proposed by Choi combustor is flowed from the top of combustor and [1]. The term ‘nanofluid’ refers to a two-phase the millimetre-sized ash is collected at the bottom direction. Thus, the fuel-air mixing flow becomes spiral flow inside the combustor, resulting in amplification of combustion. This structure plays an important role in a fuel drying and an extension of combustion time of fuel. The swirling flow yields a sufficient floating time of the fuels and attenuates the deposition of unburned fuels at the bottom of the combustor. In order to monitor and measure the combustion gas direction. Thus, the fuel-air mixing flow becomes spiral flow temperatureinside the incombustor, the combustor, resulting fourin amplification K-Type thermocouples of combustion. are inserted in the combustor and the corresponding locations (T1, SCIENTIFICThis JOURNAL-AGRICULTURAL structure plays an important ECONOMICS role in a fuel -drying 2018 and | 85 an T2, T3,extension T4) are of depictedcombustion in Fig.time 3(b).of fuel. Note The that swirling T4 is setflow in the vicinityyields of a thesufficient injection floating port time of theof the fuel-air fuels andmixing attenuates flow. the The of combustor. The hot combustion gas enters intocombustion depositionmeasured gasof by unburned temperthe gas aturefuels analyser atat the the (Testobottom outlet Limited,of theof combustor.the Testo cyclone heat exchanger and after the hot combustion gas isseparator In350). order is The also to position measuredmonitor ofand bysampling themeasure thermocouple is thelocated combustion (namedat the gas gasas T5). At thetemperature corresponding in the combustor, location, thfoure gas K-Type samples thermocouples are collected are by cooled in the heat exchanger, the cooled combustion insertedduct between in the combustor combustor and theand corresponding heat exchanger. locations (T1, reservoir bag at time intervals of 30 minutes during the self- gas flows through the cyclone separator, resulting T2, T3,As T4) mentioned are depicted previously,in Fig. 3(b). Notethe fuels that T4 are is setfed in bythe combustionvicinity of process. the injection The port combustion of the fuel-air gases,mixing i.e.,flow. O The2, CO 2, Figure 1 Schematic of experimental setup in the recovery of the micro-sized ash. At the sameNO, combustion feederN2O, NOx and gas andare temperSOxtransported areature detected at tothe the andoutlet inlet measured ofport the located cycloneby the gas time, the hot water is produced in the cycloneanalyser separatorat upper (Testo is ofalso Limited, the measured combustor. Testo by the 350). thermocoupleAt the The fuel position (namedfeeder, of as feedsampling T5). separator and the cool combustion gas without ashis locatedAtrate the can corresponding at be the adjusted gas location, ductfrom th between10.0e gas kg/hsamples combustor to 50.0are collected kg/h and by by heat exchanger.reservoir bag at time intervals of 30 minutes during the self- is discharged from the chimney. combustioncontrolling process. the frequency The combustion of the current gases, i.e.,supplied O2, CO to2, Figure 1 Schematic of experimental setup As mentioned previously, the fuels are fed by feeder and are Here, three combustion steps in the combustor NO,motor N2O, of NOx the andfeeder, SOx arebecause detected the and moisturemeasured bycontent the gas transportedanalyser (Testoto the Limited,inlet port Testo located 350). at The upper position of theof sampling combustor. are employed and following its step, the combustionAt theisand locatedfuel caloric feeder, at valuethe feed gas dependrate duct can betweenon be eachadjusted combustor unused from biomass and10.0 heatkg/h to with the used of unused biomass is performed. The50.0 exchanger. andkg/h affectby controlling the combustion the frequency characteristics. of the current Four supplied corresponding system flow is as follows: to motorkindsAs of mentioned theof feederunused previously,, because biomasses, the the fuels moisture arei.e., fed bark, bycontent feeder branch, andand arecaloric valuetransported depend to onthe inleteach port unused located atbiomass upper of theand combustor. affect the Step 1 (preheating process): the combustor is bamboo and grass, are employed to study. In the combustionAt the fuel charact feeder,eristics. feed rate Fourcan be kinds adjusted of fromunused 10.0 biomasses,kg/h to heated from normal temperature to 500oC 50.0pre-experiment, kg/h by controlling the theoptimum frequency controlof the current conditions supplied i.e., tobark, motor branch, of the feeder bamboo, because and the grass, moisture are contentemployed and caloric to study. by burner. In thevalueand pre-experiment, thermaldepend onproperties, each the unusedoptimum for fourbiomass control different and conditionsaffect unused the and Step 2 (combustion auxiliary process): thethermal combustionbiomasses, properties, charact are fordeterminederistics. four Fourdifferent andkinds are ofunused unusedsummarized biomasses, biomasses, in are combustor is heated from 500oC to 900oCdetermined i.e.,Table bark, 1(a) andbranch, and are (b),bamboo summarized respectively and grass, in .are Tableemployed 1(a) to study.and (b), respectively.In the pre-experiment, the optimum control conditions and Figure 2 Overview of experimental setup by burner and combustion of unused thermal properties, for four different unused biomasses, are biomass. determinedTable 1(a) Optimumand are summarizedcontrol conditions in Table 1(a) and (b), respectively.Table 1(a) Optimum control conditions Figure 2 Overview of experimental setup Step 3 (self combustion process): the self combustion by only the unused biomass Table 1(a) Optimum control conditions is steadily achieved with the air of burner until the experiment is over. Figure 3(a) and (b) illustrate the overview and structure of the combustor developed here, respectively. The fuel mixed with the air, a mixture of compost and air is injected to the upper inlet port of the combustor. The inlet pipe is fixed at the lateral (a) (b) (a) (b) face of the combustor and in the circumferential Table 1(b) ThermalTable propeties 1(b) Thermal propeties Figure 3 Combustor Table 1(b) Thermal propeties Figure 3 Combustor direction. Thus, the fuel-air mixing flow becomes Optimum Plate in Plate Exchanger: spiral flow inside the combustor, resulting in Optimum Plate in Plate Exchanger: Figure Figure4 depicts 4 depictsthe experimental the experimental apparatus whichapparatus which amplification of combustion. This structure plays consistsconsists of test ofsection, test section,hot water hotloop water and cold loop water and loop.cold water loop. an important role in a fuel drying and an extension WaterWater is used is as used the workingas the fluidworking in the fluid single in platethe singleheat plate heat exchanger. Thermal energy of the hot water is transferred to of combustion time of fuel. The swirling flow yields exchanger. Thermal energy of the hot water is transferred to that ofthat the ofcold the one cold through one thethrough titanium the plate titanium in the platetest in the test a sufficient floating time of the fuels and attenuates section. Here hot and cold water is supplied by the section. Here hot and cold water is supplied by the the deposition of unburned fuels at the bottom of independent loops, i.e., hot and cold water loops, respectively. The hotindependent and cold water loops, loops i.e., consist hot andof a copump,ld water a tank, loops, three respectively. the combustor. In order to monitor and measure the valvesThe and hota flow and meter, cold respectively.water loops Theconsist water of tank a pump, in the a tank, three direction.combustion Thus, the gas fuel-air temperature mixing flow in becomesthe combustor, spiral flow four hot watervalves loop and is aheated flow bymeter, a pipe respectively. heater for adjusting The water the tank in the inside the combustor, resulting in amplification of combustion. workinghot fluid water temperature, loop is whileheated the bycorresponding a pipe heater cold waterfor adjusting the This structureK-Type plays thermocouples an important arerole inserted in a fuel in drying the combustor and an loop isworking maintained fluid at thetemperature, constant temperature while the with corresponding the aid of cold water extensionand ofthe combustion corresponding time of locations fuel. The (T1, swirling T2, T3,flow T4) the chiller-unit. yields a sufficient floating time of the fuels and attenuates the loop is maintained at the constant temperature with the aid of depositionare depictedof unburned in fuelsFig. at3(b). the Notebottom that of theT4 combustor. is set in the the chiller-unit. In ordervicinity to monitorof the injectionand measure port ofthe thecombustion fuel-air mixinggas 2 temperatureflow. in Thethe combustor,combustion four gas K-Type temperature thermocouples at the are outlet inserted in the combustor and the corresponding locations (T1, 2 T2, T3,of T4) the are cyclone depicted inseparator Fig. 3(b). is Note also that measured T4 is set in by the the vicinitythermocouple of the injection (named port of the as fuel-airT5). At mixing the corresponding flow. The combustion gas temperature at the outlet of the cyclone separatorlocation, is also measuredthe gas samplesby the thermocouple are collected (named by asreservoir T5). At the bagcorresponding at time intervals location, thofe gas30 minutessamples are during collected the by self- reservoircombustion bag at time process.intervals ofThe 30 minutescombustion during gases,the self- i.e., combustion process. The combustion gases, i.e., O , CO , Figure 1 Schematic of experimental setup O , CO , NO, N O, NOx and SOx are detected2 2 and Figure 1. Schematic of experimental setup NO, N2O,2 NOx2 and SOx 2are detected and measured by the gas analyser (Testo Limited, Testo 350). The position of sampling is located at the gas duct between combustor and heat exchanger. As mentioned previously, the fuels are fed by feeder and are transported to the inlet port located at upper of the combustor. At the fuel feeder, feed rate can be adjusted from 10.0 kg/h to 50.0 kg/h by controlling the frequency of the current supplied to motor of the feeder, because the moisture content and caloric value depend on each unused biomass and affect the combustion characteristics. Four kinds of unused biomasses, i.e., bark, branch, bamboo and grass, are employed to study. In the pre-experiment, the optimum control conditions and thermal properties, for four different unused biomasses, are determined and are summarized in Table 1(a) and (b), respectively. Figure 2 Overview of experimental setup

Table 1(a) Optimum control conditions

(a) (b) Table 1(b) Thermal propeties Figure 3 Combustor

Optimum Plate in Plate Exchanger: Figure 4 depicts the experimental apparatus which consists of test section, hot water loop and cold water loop. Water is used as the working fluid in the single plate heat exchanger. Thermal energy of the hot water is transferred to that of the cold one through the titanium plate in the test section. Here hot and cold water is supplied by the independent loops, i.e., hot and cold water loops, respectively. The hot and cold water loops consist of a pump, a tank, three valves and a flow meter, respectively. The water tank in the hot water loop is heated by a pipe heater for adjusting the working fluid temperature, while the corresponding cold water loop is maintained at the constant temperature with the aid of the chiller-unit.

2 direction.direction. Thus, Thus, the the fuel-air fuel-air mi mixingxing flow flow becomes becomes spiral spiral flow flow insideinside the the combustor, combustor, resulting resulting in in amplification amplification of of combustion. combustion. ThisThis structure structure plays plays an an important important role role in in a afuel fuel drying drying and and an an extensionextension of of combustion combustion time time of of fuel. fuel. TheThe swirlingswirling flowflow yieldsyields a sufficienta sufficient floating floating time time of of the the fuels fuels and and attenuates attenuates the the depositiondeposition of of unburned unburned fuels fuels at at the the bottom bottom of of the the combustor. combustor. In In orderorder toto monitormonitor andand measuremeasure thethe combustioncombustion gasgas temperaturetemperature in in the the combustor, combustor, four four K-Type K-Type thermocouples thermocouples are are insertedinserted in inthe the combustor combustor and and the the corresponding corresponding locations locations (T1, (T1, T2,T2, T3, T3, T4) T4) are are depicted depicted in in Fig. Fig. 3(b). 3(b). Note Note that that T4 T4 is is set set in in the the vicinityvicinity of of the the injection injection port port of of the the fuel-air fuel-air mixing mixing flow. flow. The The combustioncombustion gas gas temper temperatureature atat thethe outletoutlet ofof thethe cyclonecyclone separatorseparator is isalso also measured measured by by the the thermocouple thermocouple (named (named as as T5). T5). AtAt the the corresponding corresponding location, location, th the egas gas samples samples are are collected collected by by reservoirreservoir bag bag at attime time intervals intervals of of 30 30 minutes minutes during during the the self- self- 86 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 combustioncombustion process. process. The The combustion combustion gases, gases, i.e.,i.e., OO2,2 , COCO2,2 , FigureFigure 1 1 SchematicSchematic ofof experimentalexperimental setup NO,NO, N 2NO,2O, NOx NOx and and SOx SOx are are detected detected and and measured measured by by the the gas gas analyseranalyser (Testo (Testo Limited, Limited, Testo Testo 350). 350). The The position position of of sampling sampling The test section in Fig. 4 is sandwiched by is islocated located at atthe the gasgas ductduct betweenbetween combustorcombustor andand heatheat two large side walls made of acrylic windows for exchanger.exchanger. AsAs mentioned mentioned previously, previously, the the fuels fuels are are fed fed by by feeder feeder and and are are illumination and observation. The downstream of transportedtransported to to the the inlet inlet port port located located at at upper upper of of the the combustor. combustor. cold water in one channel is heated by the upstream AtAt the the fuel fuel feeder, feeder, feed feed rate rate can can be be adjusted adjusted from from 10.0 10.0 kg/h kg/h to to 50.050.0 kg/h kg/h by by controlling controlling the the frequency frequency of of the the current current supplied supplied of hot water in the other channel. The test section to tomotor motor of of the the feeder feeder, because, because the the moisture moisture content content and and caloric caloric is insulated to reduce heat losses. The test section valuevalue dependdepend onon eacheach unusedunused biomassbiomass andand affectaffect thethe including the inlet and outlet ports is 500 mm in combustioncombustion charact characteristics.eristics. Four Four kinds kinds of of unused unused biomasses, biomasses, i.e.,i.e., bark, bark, branch, branch, bamboo bamboo and and grass, grass, are are employed employed to to study. study. length and 160 mm in width. The distance between In Inthe the pre-experiment, pre-experiment, the the optimum optimum control control conditionsconditions andand the inlet port and outlet port centre is 360 mm and thermalthermal properties, properties, for for four four different different unused unused biomasses, biomasses, areare each connection port is 20 mm in diameter. The fluid determineddetermined and and areare summarizedsummarized inin TableTable 1(a)1(a) andand (b),(b), respectively.respectively. FigureFigureFigure 2 2 OverviewOverview of ofof experimental experimentalexperimental setup setup temperature and pressure drop are measured at the test section inlet and outlet of each channel with the Table 1(a) Optimum control conditions Table 1(a) Optimum control conditions aid of K type thermocouples and pressure gauges, respectively. The overall heat transfer coefficient and frictional pressure drop are estimated by measuring the water temperature, pressure drop and the water flow rate.

Heat Transfer using Nanofluid: Figure 5 illustrates the experimental apparatus

(a)(a) (a) (b)(b) Table 1(b) Thermal propeties Figure 3 Combustor for measuring the convective heat transfer coefficient Table 1(b) Thermal propeties Figure 3 Combustor Figure 3 C ombustor which consists of a closed flow loop, a heating unit, Optimum Plate in Plate Exchanger: OptimumFigure Plate 4 indepicts Plate Exchanger:the experimental apparatus which a cooling part, and a measuring and control unit. A FigureOptimum 4 depicts Plate the in experimentalPlate Exchanger: apparatus which consists of test section, hot water loop and cold water loop. straight stainless tube with 2000 mm in length, 3.96 consists of test section, hot water loop and cold water loop. Water isFigure used as4 thedepicts working the fluid experimental in the single apparatus plate heat Water is used as the working fluid in the single plate heat mm in inner diameter, and 0.17 mm in thickness is exchanger.which consists Thermal of energy test section, of the hot hot water water is transferred loop and to exchanger. Thermal energy of the hot water is transferred to employed as the test section and electrodes for the thatcold of waterthe cold loop. one Water through is theused titanium as the plateworking in the fluid test thatsection. of the Herecold onehot throughand cold the water titanium is suppliedplate in theby testthe direct electric current heating are connected at both section.independentin the singleHere loops, platehot i.e., and heathot andcold exchanger. cowaterld water is Thermal loops,supplied respectively. energyby the independent loops, i.e., hot and cold water loops, respectively. ends. The DC power supply (TOKYO SEIDEN Theof thehot andhot coldwater water is transferred loops consist to of that a pump, of the a coldtank, onethree Thevalves hot andand acold flow water meter, loops respectively. consist of Thea pump, water a tanktank, in three the CVS1-5K) is employed and its voltage is adjustable valvesthrough and athe flow titanium meter, respectively. plate in the Thetest watersection. tank Herein the hot water loop is heated by a pipe heater for adjusting the with the aid of the voltmeter (YOKOGAWA 2011) hotworkinghot water and fluid loop cold temperature, is water heated is by whilesupplied a pipe the corresponding heaterby the for independent adjusting cold water the working fluid temperature, while the corresponding cold water to control the heat flux at the pipe . wall The test looploops, is maintained i.e., hot atand the cold constant water temperature loops, respectively.with the aid of loopthe chiller-unit.is maintained at the constant temperature with the aid of tube is surrounded by a thick thermal insulation theThe chiller-unit. hot and cold water loops consist of a pump, a material to suppress heat loss from the test section. tank, three valves and a flow meter, respectively. 2 The twelve thermocouples (100~m in diameter), The water tank in the hot water loop is heated 2 which are welded on the outer surface of the test by a pipe heater for adjusting the working fluid tube, are used to measure the local wall temperature temperature, while the corresponding cold water along the heated surface of the tube, and the other loop is maintained at the constant temperature with thermocouples are inserted into the flow at the inlet the aid of the chiller-unit. (Tin) and outlet (Tout) of the test section to measure the bulkThe temperature volumetric of fraction a working of 0.1 fluid. % is testedHere, axialfor graphene- oxide nanofluid in the present study, as shown in Fig. 6. positionsNotice arethat 150nanofluid mm, 290for highermm, 430 volume mm, fraction570 mm, can not be 710developed mm, 850mm, due to the 990mm, limitation 1130mm, of experimental 1410mm, facility. The 1690mm,Reynolds 1730mm number andis 1870ranged mm from from 3000 the inletto 10000. of An theuncertainty test section, analysis whose (Kline locations and areMcClintock named as[4]) T1, yields the following results: the uncertainty in nanofluid flow rate is T2,estimated T3, T4, T5,to T6,be T7,±1.5%, T8, T9,the T10uncertainty T11, and in T12,the physical respectively.properties isThe less working than ±1%,fluid andin thethe test uncertainty loop is in the circulatedtemperature by a measurementmagnet pump is (IWAKI estimated MD-100RM) to be ±1.5%. The anduncertainty is measured of theby anmeasuremen electromagneticts was within flow meter±3% under the conditions of this work. For reference, the nanofluid Figure 4: Experimental apparatus (KYENCE FD-81SO). The inlet working fluid was Figure 4: Experimental apparatus employed here is produced using grapheme-oxide nanosheets (1nm in thickness and 1�m in length, 1.02kg/m3, 3000W/mK). The test section in Fig. 4 is sandwiched by two large side walls made of acrylic windows for illumination and observation. The downstream of cold water in one channel is heated by the upstream of hot water in the other channel. The test section is insulated to reduce heat losses. The test section including the inlet and outlet ports is 500 mm in length and 160 mm in width. The distance between the inlet port and outlet port centre is 360 mm and each connection port is 20 mm in diameter. The fluid temperature and pressure drop are measured at the test section inlet and outlet of each channel with the aid of K type thermocouples and pressure gauges, respectively. The overall heat transfer coefficient and frictional pressure drop are estimated by measuring the water temperature, pressure drop and the water flow rate.

Heat Transfer using Nanofluid: Figure 5 illustrates the experimental apparatus for measuring the convective heat transfer coefficient which consists of a closed flow loop, a heating unit, a cooling part, and a measuring and control unit. A straight stainless tube with 2000 mm in length, 3.96 mm in inner diameter, and 0.17 Figure 5 Experimental apparatus mm in thickness is employed as the test section and electrodes for the direct electric current heating are connected at both ends. The DC power supply (TOKYO SEIDEN CVS1-5K) is employed and its voltage is adjustable with the aid of the voltmeter (YOKOGAWA 2011) to control the heat flux at the pipe wall. The test tube is surrounded by a thick thermal insulation material to suppress heat loss from the test section. The twelve thermocouples (100�m in diameter), which are welded on the outer surface of the test tube, are used to measure the local wall temperature along the heated surface of the tube, and the other thermocouples are inserted into the flow at the inlet (Tin) and outlet (Tout) of the test section to measure the (a) AFM image (b) Graphene-oxide nanofluid bulk temperature of a working fluid. Here, axial positions are Figure 6 Photographs of grapheme-oxide and its nanofluid. 150 mm, 290 mm, 430 mm, 570 mm, 710 mm, 850mm, 990mm, 1130mm, 1410mm, 1690mm, 1730mm and 1870 mm from the inlet of the test section, whose locations are named as T1, T2, T3, T4, T5, T6, T7, T8, T9, T10 T11, and T12, RESULTS AND DISCUSSION respectively. The working fluid in the test loop is circulated Thermal Production from Biomass by a magnet pump (IWAKI MD-100RM) and is measured by The timewise variation of the combustion gas temperature an electromagnetic flow meter (KYENCE FD-81SO). The is shown in Fig. 7 at different measurement positions, i.e., T1, inlet working fluid was maintained at Tin=20oC and the T2, T3, T4 and T5, as a parameter. (a), (b), (c), and (d) of Fig. corresponding value, Tout, of the outlet which depend on 7 correspond to the results for wood bark, wood branch, Reynolds number, volume fraction and heat flux, was less than bamboo and grass, respectively. Each figure observes that as 40oC throughout all experiments. Notice that the test loop is time progresses, the gas temperature is substantially increased cleaned up between runs even with the same nanofluid. and particularly, the temperature at T2 in the combustor achieves 500oC about 15 minutes later. Here, the

3

SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 87

maintained at Tin=20oC and the corresponding RESULTS AND DISCUSSION value, Tout, of the outlet which depend on Reynolds number, volume fraction and heat flux, was less Thermal Production from Biomass than 40oC throughout all experiments. Notice that The timewise variation of the combustion the test loop is cleaned up between runs even with gas temperature is shown in Fig. 7 at different the same nanofluid. measurement positions, i.e., T1, T2, T3, T4 and T5, as a parameter. (a), (b), (c), and (d) of The volumetric fraction of 0.1 % is tested Fig. 7 correspond to the results for wood bark, for graphene-oxide nanofluid in the present wood branch, bamboo and grass, respectively. study, as shown in Fig.6. Notice that nanofluid Each figure observes that as time progresses, the for higher volume fraction can not be developed gas temperature is substantially increased and due to the limitation of experimental facility. The particularly, the temperature at T2 in the combustor Reynolds number is ranged from 3000 to 10000. achieves 500oC about 15 minutes later. Here, the The volumetric fraction of 0.1 % is tested for graphene- Anoxide uncertainty nanofluid in analysisthe present (Kline study, andas shown McClintock in Fig. 6. corresponding time interval implies the pre-heating The volumetric fraction of 0.1 % is tested for graphene- Notice that nanofluid for higher volume fraction can not be oxide[4]) nanofluid yields the in followingthe present study, results: as theshown uncertainty in Fig. 6. time, but its interval depends on the ambient developed due to the limitation of experimental facility. The Noticein nanofluid that nanofluid flow forrate higher is estimatedvolume fraction to be can ±1.5%, not be temperature and climate. After that, the combustion Reynolds number is ranged from 3000 to 10000. An developedthe uncertainty due to the inlimitation the physical of experimental properties facility. is less The changes the combustion auxiliary process, that Reynoldsuncertainty number analysis is (Klineranged andfrom McClintock 3000 to 10000.[4]) yields An the uncertaintythanfollowing ±1%, analysisresults: and thethe(Kline uncertaintyuncertainty and McClintock in in nanofluid the [4])temperature flowyields rate the is is the burner works and at the same time unused followingmeasurementestimated results: to be theis±1.5%, estimateduncertainty the uncertainty into nanofluid be ±1.5%.in flowthe ratephysicalThe is biomass is supplied in the combustor as a fuel. It is estimatedproperties to isbe less ±1.5%, than the±1%, uncertainty and the uncertaintyin the physical in the propertiesuncertaintytemperature is lessmeasurementof thethan measurements ±1%, is estimand atedthe wastouncertainty be within ±1.5%. in ±3% theThe observed that the highest temperature is indicated temperatureunderuncertainty the measurementconditionsof the measuremen isof estim thists ated waswork towithin . beFor ±1.5%. ±3% reference, under The the at T3, because the burner position is set near T3 conditions of this work. For reference, the nanofluid uncertaintythe nanofluid of the measuremen employedts was here within is ±3% produced under the using and simultaneously the unused biomass burns in Figure 4: Experimental apparatus conditionsemployed ofhere this is producedwork. usingFor grapheme-oxidereference, the nanofluidnanosheets Figure 4: Experimental apparatus employedgrapheme(1nm in thicknesshere-oxide is produced and nanosheets 1�m usingin length, grapheme-oxide(1nm 1.02kg/m in thickness3, 3000W/mK). nanosheets and the combustor. After the combustor is sufficiently The test section in Fig. 4 is sandwiched by two large side (1nm1 ~m in in thickness length, and 1.02kg/m 1�m in length,3, 3000W/mK). 1.02kg/m3, 3000W/mK). heated, the burner is discontinued. wallsThe madetest section of acrylicin Fig. 4 windowsis sandwiched for byillumination two large side and wallsobservation. made of The acrylic downstream windows of cold for water illumination in one channel and is One observes that for four difference observation.heated by the The upstream downstream of hot ofwater cold in water the other in one channel. channel Theis biomasses, the highest temperature yields at T4 in heated by the upstream of hot water in the other channel. The test section is insulated to reduce heat losses. The test section test section is insulated to reduce heat losses. The test section the self-combustion process. In other words, since including the inlet and outlet ports is 500 mm in length and 160 includingmm in width.the inlet Theand outletdistance ports between is 500 themm inlet in length port and 160outlet T4. T3, T2, and T1 are gradually far away from the mm in width. The distance between the inlet port and outlet port centre is 360 mm and each connection port is 20 mm in main combustion zone, i.e., the bottom area, the portdiameter. centre is 360The mmfluid and temperature each connection and portpressure is 20 dropmm inare diameter. The fluid temperature and pressure drop are corresponding temperature attenuates gradually measured at the test section inlet and outlet of each channel measuredwith the at aid the of test K sectiontype thermocouples inlet and outlet and of pressure each channel gauges, along the vertical direction in the combustor. All with the aid of K type thermocouples and pressure gauges, respectively. The overall heat transfer coefficient and the distribution curve of temperature, for each respectively.frictional pressure The dropoverall are esheattimated transfer by measuring coefficient the andwater frictional pressure drop are estimated by measuring the water temperature, pressure drop and the water flow rate. biomass, are relatively stable as a time progresses, temperature, pressure drop and the water flow rate. and the combustion temperature in the combustor is

o o HeatHeat Transfer Transfer using using Nanofluid: Nanofluid: maintained in the range of 800 C to 1000 C. Note Figure 5 illustrates the experimental apparatus for Figure 5 illustrates the experimental apparatus for that the lower temperature difference among T1, measuringmeasuring the the convective convective heat heat transfer transfer coefficient coefficient which which consists of a closed flow loop, a heating unit, a cooling part, T2, T3 and T4 is observed in the case of grass and consists of a closed flow loop, a heating unit, a cooling part, andand a ameasuring measuring and and control control unit. unit. A Astraight straight stainless stainless tube tube bark, while larger temperature difference is seen with 2000 mm in length, 3.96 mm in inner diameter, and 0.17 with 2000 mm in length, 3.96 mm in inner diameter, and 0.17 FigureFigure 5 5 Experimental Experimental apparatus apparatus for bamboo and branch. It is postulated that balk mmmm in inthickness thickness is isemployed employed as as the the test test section section and and electrodes electrodes Figure 5 Experimental apparatus forfor the the direct direct electric electric current current heating heating are are connected connected at atboth both density is the most critical factor. In other words, ends.ends. The The DC DC power power supply supply (TOKYO (TOKYO SEIDEN SEIDEN CVS1-5K) CVS1-5K) is is since the density of grass and bark is small, grass employedemployed and and its its voltage voltage is isadjustable adjustable with with the the aid aid of of the the voltmetervoltmeter (YOKOGAWA (YOKOGAWA 2011) 2011) to toco controlntrol the the heat heat flux flux at atthe the or bark and air mixture is uniformly distributed pipepipe wall. wall. The The test test tube tube is issurrounded surrounded by by a athick thick thermal thermal in the combustor, resulting in lower temperature insulationinsulation material material to tosuppress suppress heat heat loss loss from from the the test test section. section. difference among each position of thermocouple. TheThe twelve twelve thermocouples thermocouples (100 (100�m� min indiameter), diameter), which which are are weldedwelded on on the the outer outer surface surface of of the the test test tube, tube, are are used used to tomeasure measure On the contrary, the corresponding temperature thethe local local wall wall temperature temperature along along the the heated heated surface surface of of the the tube, tube, difference, for wood branch and bamboo, becomes and the other thermocouples are inserted into the flow at the and the other thermocouples are inserted into the flow at the larger, because the densities of bamboo and branch inletinlet (Tin) (Tin) and and outlet outlet (Tout) (Tout) of of the the test test section section to tomeasure measure the the (a)(a)AFMAFMAFM image image image (b) G (b) raphene (b) Graphene-oxide Graphene-oxide-oxide nanofluid nanofluid nanofluid bulkbulk temperature temperature of of a workinga working fluid. fluid. Here, Here, axial axial positions positions are are Figure 6 Photographs of grapheme-oxide and its are higher than the other biomasses (Figs. 7(b) FigureFigure 6 Photographs6 Photographs of of grapheme-oxide grapheme-oxide and and its its nanofluid. nanofluid. 150150 mm, mm, 290 290 mm, mm, 430 430 mm, mm, 570 570 mm, mm, 710 710 mm, mm, 850mm, 850mm, nanofluid. and (c)). After bamboo or branch and air mixture 990mm,990mm, 1130mm, 1130mm, 1410mm, 1410mm, 1690mm, 1690mm, 1730mm 1730mm and and 1870 1870 mm mm fromfrom the the inlet inlet of of the the test test section, section, whose whose locations locations are are named named as as T1,T1, T2, T2, T3, T3, T4, T4, T5, T5, T6, T6, T7, T7, T8, T8, T9, T9, T10 T10 T11, T11, and and T12, T12, RESULTS AND DISCUSSION respectively. The working fluid in the test loop is circulated RESULTS AND DISCUSSION respectively. The working fluid in the test loop is circulated Thermal Production from Biomass by a magnet pump (IWAKI MD-100RM) and is measured by ThermalThe timewise Production variation from of Biomass the combustion gas temperature by a magnet pump (IWAKI MD-100RM) and is measured by The timewise variation of the combustion gas temperature an electromagnetic flow meter (KYENCE FD-81SO). The is shown in Fig. 7 at different measurement positions, i.e., T1, an electromagnetic flow meter (KYENCE FD-81SO).o The is shown in Fig. 7 at different measurement positions, i.e., T1, inlet working fluid was maintained at Tin=20 Co and the T2, T3, T4 and T5, as a parameter. (a), (b), (c), and (d) of Fig. inlet working fluid was maintained at Tin=20 C and the corresponding value, Tout, of the outlet which depend on 7 T2,correspond T3, T4 and to T5,the as results a parameter. for wood (a), bark,(b), (c), wood and (d)branch, of Fig. corresponding value, Tout, of the outlet which depend on Reynolds number, volume fraction and heat flux, was less than bamboo7 correspond and grass, to respectively.the results for Each wood figure bark, observes wood thatbranch, as Reynoldso number, volume fraction and heat flux, was less than bamboo and grass, respectively. Each figure observes that as 40 Co throughout all experiments. Notice that the test loop is time progresses, the gas temperature is substantially increased cleaned40 C throughoutup between allruns experiments. even with the Noticesame nanofluid. that the test loop is andtime particularly, progresses, thethe gastemperature temperat ureat isT2 substantially in the combustor increased cleaned up between runs even with the same nanofluid. achievesand particularly, 500oC aboutthe temperature15 minutes at T2later. in theHere, combustor the achieves 500oC about 15 minutes later. Here, the 3 3

corresponding time interval implies the pre-heating time, but its interval depends on the ambient temperature and climate. After that, the combustion changes the combustion auxiliary process, that is the burner works and at the same time unused biomass is supplied in the combustor as a fuel. It is observed that the highest temperature is indicated at T3, because the burner position is set near T3 and simultaneously the unused biomass burns in the combustor. After the combustor is sufficiently heated, the burner is discontinued. One observes that for four difference biomasses, the highest temperature yields at T4 in the self-combustion process. corresponding time interval implies the pre-heating time, but its In other words, since T4. T3, T2, and T1 are gradually far away frominterval the dependsmain combustion on the zoneambient, i.e., temperature the bottom area,and climate.the correspondingAfter that, the temper combustionature attenuates changes thegradually combustion along auxiliarythe verticalprocess, direction that is inthe the burner combustor. works and All atthe the distribution same time curve unused ofbiomass temperature, is supplied for each in biomass,the combustor are relatively as a fuel. stable Itas is a observedtime progresses,that the highest and the temperaturecombustion temperature is indicated in theat T3,combustor because is the o o maintainedburner position in the is range set near of 800T3 Cand to simultaneously1000 C. Note thatthe theunused (b) Wood branch lowerbiomass temperature burns in difference the combustor. among T1, After T2, T3the andcombustor T4 is is observedsufficiently in the heated, case of the grass burner and isbark, discontinued. while larger temperature differenceOne isobserves seen for bamboothat for and four branch. difference It is postulated biomasses, that the balkhighest density temperature is the most yields critical at T4 factor. in the Inself-combustion other words, since process. theIn otherdensity words, of grass since and T4. bark T3, isT2, small, and T1grass are or gradually bark and far air away mixturefrom the is uniformlymain combustion distributed zone in the, i.e.,combustor, the bottom resulting area, in the lowercorresponding temperature temper differeaturence attenuatesamong eachgradually position along of the thermocouple.vertical direction inOn the thecombustor. contrary, Allthe the correspondingdistribution curve temperature difference, for wood branch and bamboo, becomes of temperature, for each biomass, are relatively stable as a time larger, because the densities of bamboo and branch are higher progresses, and the combustion temperature in the combustor is than the other biomasses (Figs. 7(b) ando (c)). Aftero bamboo or branchmaintained and air in mixture the range flows of in 800to combustor,C to 1000 biomassC. Note collects that the (b) Wood branch onlower the bottomtemperature of combustor difference and amongthe self-combustion T1, T2, T3 processand T4 is takesobserved place. in theTherefore case of grasshighes ant combustiond bark, while gas larger temperature temperature yieldsdifference near is theseen bottomfor bamboo area andand branch. temperature It is postulatedgradually that attenuatesbalk density in theis thedirection most criticalof the combustorfactor. Inexit, other resulting words, in since largerthe density temperature of grass differ andence bark among is T1,small, T3 andgrass T4. or bark and air mixture 88 | isSCIENTIFIC uniformly JOURNAL-AGRICULTURALdistributed in the combustor, ECONOMICS resulting in - 2018 lower temperature difference among each position of ( c ) Banboo thermocouple. On the contrary, the corresponding temperatureflows difference,into combustor, for wood branch biomass and bamboo, collects becomes on the larger,bottom because of thecombustor densities ofand bamboo the andself-combustion branch are higher thanprocess the other takes biomasses place. (Figs. Therefore 7(b) and highest (c)). After combustion bamboo or branch and air mixture flows into combustor, biomass collects ongas the temperaturebottom of combustor yields andnear the the self-combustion bottom area process and takestemperature place. Therefore gradually highes attenuatest combustion in the gas direction temperature of yieldsthe combustornear the bottomexit, resulting area and in largertemperature temperature gradually attenuates in the direction of the combustor exit, resulting in largerdifference temperature among differ T1,ence T3 among and T1,T4. T3 and T4.

( c ) Banboo

(a) Wood bark

(d ) Grass Figure 7 Temperature distribution(d) Grass of unused biomass Figure 7 Temperature distribution of unused biomass Table 2 shows the analytical results of the combustion

gases forTable four different 2 shows unused thebiomasses analytical and for reference,results theof the combustion gases for four different unused 4 biomasses and for reference, the discharge standard value is illustrated as Table 3. Comparing Table

(a)WoodWood bark bark 2 with Table 3, it is found that NOx and SOx are corresponding time interval implies the pre-heating time, but its discharge standard value is illustrated as Table 3. lower than the discharge standard value, while CO 5000 interval depends on the ambient temperature and climate. dischargeComparing Tablestandard 2 with value Table is3, it illustratedis found that as NOx Table and SOx3. corresponding time interval implies the pre-heating time, but its is higher than the discharge standard value. Separate herringbone(Block) After that, the combustion changes the combustion auxiliary Comparingare lower than Table the 2discharge with Table standard 3, it is value,found whilethat NOx CO andis higher SOx 5000 interval depends on the ambient temperature and climate. (d ) Grass SeparatePlover patte herringbone(Block) rn(Block) process, that is the burner works and at the same time unused than the discharge standard value. K] are lower than the discharge standard value, while CO is higher 2 biomassAfter that, is suppliedthe combustion in the combustor changes theas acombustion fuel. It is observedauxiliary Table 2 GasFigure analysis 7 Temperature of the combustion distribution gasof unused biomass 4000 PloverFlat patte rn(Block) than the discharge standard value. K]

2 thatprocess, the thathighest is the temperature burner wo rksis indicatedand at the at same T3, timebecause unused the Table 2 Gas analysis of the combustion gas FlatHerringbone biomass is supplied in the combustor as a fuel. It is observed 4000 burner position is set near T3 and simultaneously the unused Table 2 shows the analytical results of the combustion HerringboneSeparate herringbone that the highest temperature is indicated at T3, because the Table 2 Gas analysis of the combustion gas biomass burns in the combustor. After the combustor is gases for four different unused biomasses and for reference, the 3000 Separate herringbone sufficientlyburner position heated, is setthe nearburner T3 is and discontinued. simultaneously the unused biomassOne burnsobserves in thethat combustor. for four difference After the biomasses, combustor theis 3000 highestsufficiently temperature heated, the yields burner at T4 is discontinued.in the self-combustion process. 4 2000 In otherOne words, observes since thatT4. T3,for T2,four and difference T1 are gradually biomasses, far away the fromhighest the temperature main combustion yields at T4zone in, thei.e., self-combustion the bottom area, process. the 2000 In other words, since T4. T3, T2, and T1 are gradually far away corresponding temperature attenuates gradually along the Table 3 Discharge standard value in environment from the main combustion zone, i.e., the bottom area, the vertical direction in the combustor. All the distribution curve Table 3Table Discharge 3 Discharge standard standard value value in in environment environment 1000 corresponding temperature attenuates gradually along the of temperature, for each biomass, are relatively stable as a time 1000 vertical direction in the combustor. All the distribution curve progresses, and the combustion temperature in the combustor is Overall heat transfer coefficient [W/m maintainedof temperature, in thefor eachrange biomass, of 800o Care to relatively 1000oC. stable Note asthat a time the (b)WoodWood branch branch Overall heat transfer coefficient [W/m 0 progresses,lower temperature and the combustiondifference amongtemperature T1, T2,in the T3 combustor and T4 is o o 0 0 1000 2000 3000 4000 maintainedobserved in thein thecase range of grass of an800d bark,C to while1000 largerC. Note temperature that the (b) Wood branch Optimum of Plate Shape in Plate Exchanger Figure 8 depicts the overall heat transfer coefficient for differencelower temperature is seen for difference bamboo andamong branch. T1, T2, It is T3postulated and T4 that is Optimum of Plate Shape in Plate Exchanger 0 1000Reynolds 2000 number 3000 4000 balkobserved density in the is thecase most of grass critical and factor.bark, while In otherlarger words, temperature since differentFigure plate 8 depictsshapes. the Here, overall “Separate heat transfer herringbone coefficient (Block)” for difference is seen for bamboo and branch. It is postulated that and “Plover Pattern (Block)” in figure imply that the angle of Figure 8 Overall heat transferReynolds coefficient number for different plates the density of grass and bark is small, grass or bark and air different plate shapes. Here, “Separate herringbone (Block)” balk density is the most critical factor. In other words, since convexOptimum part is edge. of PlateThe corr Shapeesponding in Plate coefficients Exchanger for the mixture is uniformly distributed in the combustor, resulting in and “Plover Pattern (Block)” in figure imply that the angle of Figure6000 8 Overall heat transfer coefficient for different plates the density of grass and bark is small, grass or bark and air herringboneFigure plate8 depictsand separated the overall herringbone heat platetransfer are lower temperature difference among each position of convex part is edge. The corresponding coefficients for the Separate herringbone(Block) mixture is uniformly distributed in the combustor, resulting in substantially higher than that for flat plate over the whole range 6000 thermocouple. On the contrary, the corresponding coefficientherringbone plate for and differentseparated herringbone plate shapes.plate are Here, Plover pattern(Block) lower temperature difference among each position of of the volume flow rate considered here. This is because the Separate herringbone(Block) temperature difference, for wood branch and bamboo, becomes substantially higher than that for flat plate over the whole range 5000 Flat thermocouple. On the contrary, the corresponding “Separateflow is disturbed herringbone by the presence (Block)” of the ribs constructedand “Plover on the Plover pattern(Block) larger, because the densities of bamboo and branch are higher of the volume flow rate considered here. This is because the 5000 Herringbone temperature difference, for wood branch and bamboo, becomes plate, resulting in enhancement of heat transfer performance. Flat than the other biomasses (Figs. 7(b) and (c)). After bamboo or Patternflow is disturbed (Block)” by thein presencefigure ofimply the ribs that constructed the angle on the of Separate herringbone The corresponding frictional pressure drop is summarized in Herringbone branchlarger, becauseand air mixturethe densities flows of in tobamboo combustor, and branch biomass are collects higher plate, resulting in enhancement of heat transfer performance. 4000 convexFig. 9. Itpart is observed is edge. in TheFig. 9corresponding that substantial higher coefficients frictional Separate herringbone onthan the the bottom other biomasses of combustor (Figs. and 7(b) the and self-combustion (c)). After bamboo process or The corresponding frictional pressure drop is summarized in 4000 pressure drop occurs on the herringbone plate in comparison takesbranch place. and air Thereforemixture flows highes intto combustioncombustor, biomassgas temperature collects forFig. the9. herringbone It is observed in plate Fig. 9 and that separatedsubstantial higher herringbone frictional with the other plates, particularly the separated herringbone 3000 yieldson the bottomnear the of combustorbottom area and andthe self-combustiontemperature gradually process pressure drop occurs on the herringbone plate in comparison plateplate. areIn other substantially words, the higherfriction pressure than that drop for for flatthe attenuatestakes place. in theTherefore direction highes of thet combustioncombustor exit,gas temperatureresulting in with the other plates, particularly the separated herringbone 3000 separated herringbone plate is lower and is almost the same as largeryields temperaturenear the differbottomence area among and T1, temperatureT3 and T4. gradually plateplate. overIn other the words, whole the range friction of pressure the volume drop for flow the 2000 attenuates in the direction of the combustor exit, resulting in separatedthat for the herringbone plate plat. plate Note is that lower the andopen is space almost of themiddle same line as rate considered here. This is because the flow is 2000 larger temperature difference among T1, T3 and T4. of the separated herringbone pattern causes the main fluid flow, Frictional pressure drop [Pa] ( c ) Banboo that for the plate plat. Note that the open space of middle line disturbedresulting in byan theattenuation presence of theof thepressure ribs constructeddrop, even if onthe 1000 of the separated herringbone pattern causes the main fluid flow, Frictional pressure drop [Pa] hydrodynamic diameter is the same. (( cc ) )Banboo Banboo theresulting plate, in resultingan attenuation in enhancement of the pressure ofdrop, heat even transfer if the 1000 hydrodynamic diameter is the same. 0 performance. The corresponding frictional pressure 0 0 1000 2000 3000 4000 0 1000Reynolds 2000 number 3000 4000

Figure 9 Friction pressure dropReynolds in narrow number channel for different

Figure 9 Friction pressure dropplates in narrow channel for different plates

(a) Wood bark

(a) Wood bark

(d ) Grass

Figure 7 Temperature distribution of unused biomass

(d ) Grass

TableFigure 2 7 showsTemperature the analytical distribution results of unused of the biomass combustion

gases for four different unused biomasses and for reference, the Table 2 shows the analytical results of the combustion gases for four different unused biomasses and for reference, the 4 5 5 4

SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 89

drop is summarized in Fig. 9. It is observed in Fig.Heat with Transfer volume using Nanofluidfraction as the parameter. The 9 that substantial higher frictional pressure drop Figurecorresponding 10 depicts thedata relationship of CuO between and NusseltAl O numberare Nu and Reynolds number Re with volume fraction2 3 as the SUMMARY occurs on the herringbone plate in comparison superimposed for comparison [5]. Here the heat parameter. The corresponding data of CuO and Al2O3 are The thermal production from the biomass, the heat with the other plates, particularly the separatedsuperimposed transfer coefficientfor comparison at x/D=200, [5]. Here which the correspondsheat transfer exchange of its production to the working fluid, and higher herringbone plate. In other words, the frictioncoefficient to the athydrodynamically x/D=200, which and correspondsthermally fully-to the efficiency thermal fluid transport have been introduced. The pressure drop for the separated herringbone platehydrodynamically developed region and thermally based onfully-developed the pre-experimental region based results are summarized as follows: on the pre-experimental result, is employed to obtain the (a) Four different unused biomasses employed here can is lower and is almost the same as that for the plateNusselt result, number. is employed to obtain the Nusselt number. combust and release energy steadily in the small plat. Note that the open space of middle line of the combustor developed in the resent study. Combustion 100 separated herringbone pattern causes the main fluid gases. i.e, nitrogen oxides and sulfur oxides are lower than 90 flow, resulting in an attenuation of the pressure the standard value in the environment. Moisture content, 80 compost can be combusted as a fuel and the combustion drop, even if the hydrodynamic diameter is the 70 gas temperature is controlled by air-fuel ratio. same. 60 (b) Overall heat transfer coefficient for herringbone plate is 50 higher than the other of plate shapes employed here. The discharge standard value is illustrated as Table 3. Nu Comparing Table 2 with Table 3, it is found that NOx and SOx 5000 corresponding frictional pressure drop is substantially discharge standard value is illustrated as Table 3. Separate herringbone(Block) 40 Comparingare lower than Table the 2discharge with Table standard 3, it is value,found whilethat NOx CO andis higher SOx 5000 1.0% high. On the contrary, an amplification of frictional SeparatePlover patte herringbone(Block) rn(Block) 30 than the discharge standard value. K] pressure drop is suppressed for the separate herringbone are lower than the discharge standard value, while CO is higher 2 0.1% 4000 PloverFlat patte rn(Block) 20 0.1% CuO nanofluid than the discharge standard value. K] plate. 2 Herringbone 0.0% Table 2 Gas analysis of the combustion gas 4000 Flat 10 0.1% Al O nanofluid (c) Heat transfer performance in the circular tube flow is Separate herringbone 2 3 Table 2 Gas analysis of the combustion gas Herringbone 0 amplified by suspension of nanoparticles in comparison Separate herringbone 3000 3000 4000 5000 6000 7000 8000 9000 with that of the working fluid. 3000 Re

2000 Figure Figure10 Heat 10 transferHeat transfer performance performance for differentfor different volume 2000 REFERENCES fractions of nanofluidvolume fractions of nanofluid [1] Choi, S. U. S., 1995, “Enhancing thermal conductivity of Table 3 Discharge standard value in environment 1000 fluids with nanoparticles,” in Developments Applications Table 3 Discharge standard value in environment For reference, the following Gnielinski equation [6] in the 1000 of Non-Newtonian Flows, FED-vol. 231/MD-vol. 66, turbulent flowFor is superimposedreference, t heas a solidfollowing line: Gnielinski Overall heat transfer coefficient [W/m ASME: 99-105, edited by D. A. Siginer and H. P. Wang. equation [6] in the turbulent flow is superimposed

Overall heat transfer coefficient [W/m New York. 0 as a solid(f line8 )(Re: −1000 )Pr [2] Khanafer, K., Vafai, K., and Lightstone, M., 2003, Optimum of Plate Shape in Plate Exchanger 0 0 1000 2000 3000 4000 Nu = , (1) Figure 8 depicts the overall heat transfer coefficient for 2 3 “Buoyancy-driven heat transfer enhancement in a two- Optimum of Plate Shape in Plate Exchanger 0 1000Reynolds 2000 number 3000 4000 1.07 +12.7 f 8()Pr −1 differentFigure plate 8 depictsshapes. the Here, overall “Separate heat transfer herringbone coefficient (Block)” for Figure 8 Overall heat transfer coefficient for (f 8)(Re −1000)Pr dimensional enclosure utilizing nanofluid,” International Reynolds number where Nu = , (1) and “Plover Pattern (Block)” in figure imply that the angle of Figure 8 Overall heat transfer coefficient for different plates 2 3 Journal of Heat and Mass Transfer, 46, pp. 3639-3653. different plate shapes. Here, “Separate herringbone (Block)” different plates 1.07 +12 .7 f 8(−Pr 2 −1) andconvex “Plover part Patternis edge. (Block)” The corr in espondingfigure imply coefficients that the angle for the of Figure 8 Overall heat transfer coefficient for different plates f = []1.82 log10 ()Re −1.64 (2) [3] Lee, S., Choi, S. U. S., Li, S. and Eastman, J. A., 1999, herringbone plate and separated herringbone plate are 6000 convex part is edge. The corresponding coefficients for the Separate herringbone(Block) “Measuring thermal conductivity of fluids containing herringbonesubstantially higherplate thanand thatseparated for flat plateherringbone over the wholeplate range are 6000 SeparatePlover pattern(Block) herringbone(Block) One observeswhere that the Nusselt numbers for each nanofluid are oxide nanoparticles,” Journal of Heat Transfer, 121, pp. substantiallyof the volume higher flow thanrate consideredthat for flat here.plate over This the is wholebecause range the 5000 PloverFlat pattern(Block) slightly higher than that for pure water. And heat transfer 280–289. offlow the is volume disturbed flow by ratethe presenceconsidered of here.the ribs This constructed is because on the −2 (2) plate, resulting in enhancement of heat transfer performance. 5000 FlatHerringbone performancef = becomes[1.82 log 10 larger(Re ) −in1. 64 the] higher Reynolds number [4] Kline, S. J., and McClintock, F.A., 1953, Mechanical flow is disturbed by the presence of the ribs constructed on the Separate herringbone plate,The corresponding resulting in enhancementfrictional pressure of heat drop transfer is summarized performance. in 4000 Herringbone region, as expected. Thus since the volume fraction of Engineering, 3. TheFig. 9.corresponding It is observed frictional in Fig. 9pressure that substantial drop is highersummarized frictional in 4000 Separate herringbone nanoparticle is substantially low, heat transfer enhancement is [5] Torii, S., 2010, “Turbulent heat transfer behavior of Fig.pressure 9. Itdrop is observed occurs onin Fig.the 9he thatrringbone substantial plate higher in comparison frictional slightly attributed due to the suspension of nanoparticles. In nanofluid in a circular tube heated under constant heat with the other plates, particularly the separated herringbone 3000 One observes that the Nusselt numbers for pressure drop occurs on the herringbone plate in comparison contrast, substantial heat transfer enhancement yields for flux,”Advances in Mechanical Engineering, ID 917612, plate. In other words, the friction pressure drop for the 3000 each nanofluid are slightly higher than that for pure with the other plates, particularly the separated herringbone grapheme-oxide nanofluid. Throughout the experimental pp.1-7. plate.separated In herringbone other words, plate the is lowerfriction and pressure is almost drop the samefor the as 2000 that for the plate plat. Note that the open space of middle line results,water. heat transferAnd heat enhancemen transfert isperformance caused by the becomes suspension [6]. Gnielinski, V., 1976, “New equations for heat and mass separated herringbone plate is lower and is almost the same as 2000 thatof the for separated the plate herringbone plat. Note patternthat the causes open spacethe main of middle fluid flow, line Frictional pressure drop [Pa] of particleslarger andin theits trendhigher becomes Reynolds larger numberfor grapheme-oxide region, transfer in turbulent pipe and channel flow,” International resulting in an attenuation of the pressure drop, even if the 1000 of the separated herringbone pattern causes the main fluid flow, Frictional pressure drop [Pa] nanofluid.as expected. In general, Thus the since particle the volume fractionfraction in of the Chemical Engineering, 16, pp. 359-368. hydrodynamic diameter is the same. resulting in an attenuation of the pressure drop, even if the 1000 centerlinenanoparticle of the pipe is increasessubstantially and leads low, to heatthe increasing transfer of hydrodynamic diameter is the same. the viscosity and as a consequence of the viscosity increase 0 enhancement is slightly attributed due to the 0 0 1000 2000 3000 4000 near the centerline, resulting in flat velocity profile. This trendsuspension becomes larger, of nanoparticles. because for In the contrast, nanofluid substantial including 0 1000Reynolds 2000 number 3000 4000 grapheneheat oxidetransfer nanosheets enhancement (1nm inyields thickness for graphemeand 1�m- in Reynolds number Figure 9 Friction pressure drop in narrow channel for different length)oxide the nanofluid.corresponding Throughoutcentral velocity the in theexperimental pipe is Figure 9 Friction pressure dropplates in narrow channel for different suppressed due to its flat sheet in comparison with that Figure 9 Friction pressure drop in narrow channel for results, heat transfer enhancement is caused by plates nanofluids for CuO and Al2O3. At the same time, the different plates substantialthe suspension velocity gradient of particles is induced and itsin thetrend vicinity becomes of the heatedlarger wall. for It grapheme is postulated-oxide that nanofluid. the particle, In general,i.e., nanosheet the Heat Transfer using Nanofluid suspensionparticle induces volume the fraction velocity in gradient the centerline neat the of heated the pipe wall, Figure 10 depicts the relationship betweenresulting in enhancement of heat transfer performance for lower volumeincreases fraction and of grapheme-oxide leads to the increasing nanofluid. of the viscosity Nusselt number Nu and Reynolds number Re and as a consequence of the viscosity increase near 6

5 5

90 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 the centerline, resulting in flat velocity profile.This Heat transfer performance in the circular tube trend becomes larger, because for the nanofluid flow is amplified by suspension of nanoparticles in including graphene oxide nanosheets (1nm in comparison with that of the working fluid. thickness and 1mm in length) the corresponding central velocity in the pipe is suppressed due to its REFERENCES flat sheet in comparison with that nanofluids for [1] Choi, S. U. S., 1995, “Enhancing thermal

CuO and Al2O3. At the same time, the substantial conductivity of fluids with nanoparticles,” velocity gradient is induced in the vicinity of the in Developments Applications of Non- heated wall. It is postulated that the particle, i.e., Newtonian Flows, FED-vol. 231/MD- nanosheet suspension induces the velocity gradient vol. 66, ASME: 99-105, edited by D. A. neat the heated wall, resulting in enhancement of Siginer and H. P. Wang. New York. heat transfer performance for lower volume fraction [2] Khanafer, K., Vafai, K., and Lightstone, of grapheme-oxide nanofluid. M., 2003, “Buoyancy-driven heat transfer enhancement in a two-dimensional SUMMARY enclosure utilizing nanofluid,” The thermal production from the biomass, International Journal of Heat and Mass the heat exchange of its production to the working Transfer, 46, pp. 3639-3653. fluid, and higher efficiency thermal fluid transport [3] Lee, S., Choi, S. U. S., Li, S. and have been introduced. The results are summarized Eastman, J. A., 1999, “Measuring thermal as follows: conductivity of fluids containing oxide Four different unused biomasses employed nanoparticles,” Journal of Heat Transfer, here can combust and release energy steadily 121, pp. 280–289. in the small combustor developed in the resent [4] Kline, S. J., and McClintock, F.A., 1953, study. Combustion gases. i.e, nitrogen oxides and Mechanical Engineering, 3. sulfur oxides are lower than the standard value in [5] Torii, S., 2010, “Turbulent heat transfer the environment. Moisture content, compost can behavior of nanofluid in a circular tube be combusted as a fuel and the combustion gas heated under constant heat flux,”Advances temperature is controlled by air-fuel ratio. in Mechanical Engineering, ID 917612, Overall heat transfer coefficient for pp.1-7. herringbone plate is higher than the other of plate [6]. Gnielinski, V., 1976, “New equations for shapes employed here. The corresponding frictional heat and mass transfer in turbulent pipe pressure drop is substantially high. On the contrary, and channel flow,” International Chemical an amplification of frictional pressure drop is Engineering, 16, pp. 359-368. suppressed for the separate herringbone plate. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 91

ECONOMIC DIVERSIFICATION IN MONGOLIA: IMPORT SUBSTITUTION AND EXPORT ORIENTATION

Kadirbyek Dagys1 * (MSc), Song kun Lee2 (prof. dr.), Liesbeth Dries3 (associate prof. dr.), Bakey Agipar4 (prof. dr.), WJM Heijman3 (prof. dr.) 1 Management Department, Mongolian University of Life Sciences; AEP Group, Wageningen UR 2 Management Department, Mongolian University of Life Sciences; Daegu University 3 AEP Group, Wageningen UR 3 Research Center for Agricultural Economics and Development, Mongolian University of Life Sciences

*[email protected], [email protected]

Abstract Economic diversification is important for countries where depend heavily on natural resources and it contributes to reducing the degree of dependency on the mining sector by developing the non-mining sector, creating jobs, and increasing quality of life of those countries. There are two main diversification strategies that import substitution and export orientation. The Government of Mongolia has issued a couple of policy documents to diversify the economy. The study analyzes the structure of the Mongolian economy, imports, exports, and ways to diversify the economy. In order to determine proper strategies of economic diversification of Mongolia, economic diversification (import substitution and export orientation) experiences and successes of high, middle-income as well as natural resource-rich economies, i.e., South Korea, Norway, Thailand, Mexico, Russia, Kazakhstan and Saudi Arabia, were also reviewed.

Эдийн засгийг олон тулгуур салбартай болгох асуудал байгалийн баялгаас хамааралтай орнуудын хувьд чухал ач холбогдолтой бөгөөд эдийн засгийн олон тулгуур салбартай байх нь уул уурхайн салбараас хараат байдлыг багасгаж, уул уурхайн бус салбарыг хөгжүүлж, ажлын байр бий болгох, амьдралын чанарыг сайжруулахад чухал ач холбогдолтой билээ. Эдийн засгийг олон тулгуур салбартай болгох үндсэн хоёр стратеги байдаг нь импортыг орлох ба экспортын баримжаатай үйлдвэрлэлийг дэмжих явдал мөн. Монгол Улсын Засгийн газраас эдийн засгийг солонгоруулах хэд хэдэн бодлогын баримт бичиг гаргаж ажиллаж байна. Энэхүү судалгааны ажил нь Монголын эдийн засгийн бүтэц, импорт, экспорт болон эдийн засгийг солонгоруулах аргуудыг тодорхойлоход чиглэгдсэн болно. Монгол Улсын эдийн засгийг солонгоруулах стратегиүдийг тодорхойлохын тулд өндөр, дундаж орлоготой болон байгалийн баялаг ихтэй орнуудын, үүнд Өмнөд Солонгос, Норвегм, Тайланд, Мексик, ОХУ, Казахстан, Саудын Араб, эдийн засгийг солонгоруулсан туршлага, амжилтын талаар мөн авч үзсэн болно. 92 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

ESTIMATING ARMINGTON ELASTICITIES FOR WHEAT IN MONGOLIA

Amar Uuld1, Dr.Robert Magda PhD2 PhD Student1, Associate Professor2 Szent Istvan University,Faculty of Economics and Social Sciences, H-2100 Godollo, Pater Karoly str. 1

[email protected], [email protected]

Abstract Crop production has been increasing since 2008 when the Third Land Rehabilitation Campaign started. Even domestic production of wheat is increasing, amount of imported wheat in Mongolia is still significant. Based on that, this paper is to provide estimated Armington elasticities for wheat in Mongolia. The Armington elasticity is based on the assumption that specific product is differentiated by its origin. It has been estimated Armington elasticities in short term elasticity is 0.83, in long term elasticity is 1.93. It has been evidenced on the basis of the research result that it is possible to substitute some imported goods by domestic production of those goods and probability increase the opportunity of substitution of imported wheat by domestic production in the future in Mongolia. Keywords: Armington elasticities, wheat, optimal allocation ratio, domestic price elasticity and import price elasticity

INTRODUCTION and importing goods in consumption (called Wheat is also widely produced across the Armington elasticity). More specifically, the world. Total world wheat production was Armington elasticity is an economic parameter 757.9 million tons in 2017. China (125.9 million commonly used in e.g. international trade models tons) was the largest producer of wheat in 2017, and measures the degree of substitution between followed by the India (94.3 million tons) and the imported and domestic goods due to changes in the United States (61.6 million tons). Other major relative price of those goods. The purpose of this wheat-producing countries are Russia Federation, paper is to provide estimated Armington elasticities Kazakhstan, Canada, Pakistan and Turkey. Major for wheat in Mongolia. wheat exporters are Argentina, Australia, Canada, the EU, Kazakhstan, Russian Federation, Ukraine THEORETICAL BACKGROUND and the United States. Major importing countries In 1961, Arrow, Chenery, Minhas and Solow are North African countries, Middle East, North have developed production function with constant East Asian countries (FAO, 2017). elasticity of substitution (CES) as extension of Wheat is the one of the most important Cobb-Douglas Function. This kind of study is agricultural crop in Mongolia. In 2017, total sown pioneered by Armington(1969) developing the area in Mongolia was 365.6 thousand ha that is theoretical basis approach for trade elasticity. increased by almost 10 thousand ha in the last year In general, the elasticity of substitution between (Bulletin, NSO, 2017). Total production of wheat two products depends on the degree of product is 231.4 thousand tons and the yield is 610 kg/ha. differentiation. The greater the differentiation, the Wheat production is twofold decrease from 467.1 smaller the elasticity of substitution between the thousand tons in the same period last year. Besides, products. Product differentiation entails at least in the last years, domestic wheat producers faced two dimensions. Firstly, goods are considered climate drought affected that. Wheat import was imperfect substitutes when they are physically 13.6 thousand tons in last year. different. Secondly, product differentiation can also For decades, international economists involve differentiation by e.g., availability in time, have modelled substitution between domestic convenience of purchase, after-sales service bundled SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 93 with the good or even consumers perceptions of elasticities for import demand and domestic demand. inherent unobservable quality (Bruce A.Blonigen We can use share parameter in this calculation. The et al, 1999). import and domestic production causes from price of import and demand, which is is shown below Constant elasticity of substitution equation (7) and (8). (Armington elasticities) We assumed that consumer maximizes utility (7) U, who use domestic products and foreign products at same time and same products. The CES function (8) is shown below equation. The solution to the price elasticities of import (1) and domestic demand, whose derivities by price of import and domestic from equation (7), (8). Where U is subutility over the domestic and imported wheat, M is the imported quantity of (9) wheat, D is the domestic production, σ is the constant elasticity of substitution between domestically produced and imported wheat and finally β is share parameter. From this, the first -order condition is (10) (2)

Where is elasticity of import price and Where p and p are the price of the domestic D M is elasticity of domestic price. The and are and the imported wheat respectively. Taking relative below equation. logarithms on both sides of the equation (2). Here , is, (3) DATA Then, which gives us the condition for optimal We required four data series to estimate. Here ratio of import and domestic demand equation is are, imported wheat quantity, domestic production shown below equation. and their respective prices. The data has been collected from the Mongolian Statistical Yearbook (4) and Mongolian Customs Yearbook. The period that was analysed in this study, includes the years Equation(3) is replaced by equation(4) which is between 1997 and 2017. Until the early 1990s, established equation (5). Mongolia had a fairly closed economy. At that time (5) - as part of more wide-ranging economic reforms - the trade policy of protection and import substitution or (6) was replaced by a much more open trade regime. The estimation of Armington elasticities requires Where are estimated parameter, data on both import prices and real-valued imports and requires data on prices of the corresponding substitution elastcity in long term( ) domestic goods and real values of domestic sales of domestic goods. All of price in real based on 2015 The elasticities for price of import years. All quantities are given in thousand tons. demand and domestic demand in short run and long run RESULTS We estimated equation (6) for the wheat using In this part, we were calculated the price ordinary least squares. In many economic time series 94 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 data are probably non-stationary. Non-stationary variables imply the risk of spurious regression Table 3. Estimation of price elasticities for import unless they are co-integrated. An Augmented and demand Import price(EP ) Domestic price(EP ) Dickey-Fuller (ADF) test for identifying the order M D Short Long Short Long of integration for the price and quantity ratio is term term term term conducted to determine the order of integration. Elasticity -0.833 -0.678 -0.209 -0.323 Each variable is integrated at the first order I(1) price (ADF test results shown in appendix table 1). Source: Results of own calculation Thus, to avoid the risk of spurious regressions these series are dropped from continuing analysis. The elasticities for import price is higher than The regression results are presented in appendix domestic price elasticities. It is means consumers table 2. Our estimates of Armington elasticities have bought prefer import to domestic production. (short run and long run) are presented in Table 1. Long term elasticities are larger than short term CONCLUSION elasticities (Mcdaniel at al, 2002). That suggests This paper is providing estimates of elasticity that substitution between domestically produced of substitution between imported and domestically and imported goods is easily made in the long term produced for wheat in Mongolia. In addition, we compared to in the short-term. The study result calculated optimal allocation ratio and elasticity of reveals that long-term elasticity of substitution import and domestic price these products. Elasticity is higher than short term, which means that those of substitution shows that it is possible to substitute products produced domestically are highly possible imported goods by domestic goods. For wheat, long to substitute the same types of imported products. term elasticity of substitution is higher than short term, which means that those products produced Table 1. Armington elasticities estimation domestically are highly possible to substitute the Elasticity Elasticity imported products. of of Ad. According to, estimation of optimal substitu­ substitu­ t DW R2 tion σ/ tion σ*/ allocation ratio, there is trend of decreasing Short run/ Long run/ domestic production in the future (56.7%). In price Armington elasticities, import price elasticities calculated 0.83* 1.93 1.982 0.43 2.12 elasticities higher than domestic price elasticities for selected *- indicates significance 5 % level goods. It is means that consumers prefer consume import product more than domestic product. Table 2 shows that optimal allocation ratio. The β shows that optimal allocation ratio for wheat REFERENCES import and domestic production. Estimation reveals 1. Alexandre, S., Lecocq, F., Delacote, P., that long term optimal allocation ratio is higher than Caurla, S., Barkaoui, A., & Garcia, S. short term. Thus, the optimal allocation has satisfied (2011). Estimating Armington elasticities by share of domestic production is decreasing and for sawnwood and application to the share of import is increasing in long term. French Forest Sector Model. Resource and Energy Economics, 771-781. Table 2. Estimation of optimal allocation ratio 2. Armington.S, P. (1969). A Theory of Short term Long term Share of Share of Share of Share of demand for products distinguished import domestic import domestic by place of production. Staff Papers Share International Monetary Fund, 159-177. 34.8 65.2 43.3 56.7 parameter (β) 3. Blonigen, B. A., & W.Wilson, W. (1999). Source: Results of own calculation Explaining Armington: What determines substitutability between home and foreign We calculated elasticities of import price goods. Canadian Journal of Economics, and domestic price for wheat. Table 3 shows that 1-21. estimation of elasticities of price. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 95

4. Cheng, F. (1997). An Armington model elasticities in a CGE economy-energy- of the U.S.demand for scallops. USA: environmental for Europe. Economic University of Maine. Modleling, 1993-1999. 5. Chuantian, H., Chunding, L., Wang, J., 11. Plassmann, F. (2005). The advantage of & Whalley, J. (2017). The Armington avoiding the Armington assumption in assumption and the size of optimal tariffs. multi-region models. Regional Science Economic Modelling, 214-222. and Urban Economics, 777-794. 6. David W. Roland-Holst, K. A. (1992). 12. Robert, L., & Shima, S. (2011). Forest Disaggregated Armington elasticities biomass and Armington elasticities in for the mining and manufacturing sector Europe. Biomass and Bioenergy, 415-420. for the United States. Journal of Policy 13. Seung-Ryong, Y., & Won, W. K. (1993). Modelling, 1-28. A generalized Armington trade model: 7. Gallaway, M. P., Mcdaniel, C.A., & Respecification. Agricultural economics, A.Rivera, S. (2003). Short-run and long- 347-356. run industry-level estimates of U.S. 14. Welsch, H. (2008). Armington elasticities Armington elasticities. North American for energy policy modeling: Evidence Journal of Economics and Finance, 49-69. from four European countries. Energy 8. Haq, Z. U., & MuhammadIshaq. (2005). economics, 2252-2264. An Armington assumption approach to 15. Whalley, J., & Xin, X. (2009). Home model international trade flow and market and regional biases and border effects share for apples in Canada. Bangladesh in Armington type model. Economic Agricultural economics, 1-16. Modelling, 309-319. 9. Mongolia,N.S. (2016). Mongolian 16. Zoryana, O., & Hannah, S.-F. (2016). Are Statistical yearbook. Ulaanbaatar: Armington elasticities different across National Statistical of Mongolia. countries and sectors? A European study. 10. Nemeth, G., Szabo, L., & Cizcar, Economic Modelling , 328-342. J.C. (2011). Estimation of Armington

APPENDIX

Table 1. ADF test result Level Difference (first order) Degree of Variables t-stat p-value t-stat p-value integrated Ratio of quantity wheat -1.5590 0.1094 -6.0122 0.0000 I(1) Ratio of price -0.9873 0.2787 -4.8981 0.0001 I(1) Source: Result of E-views 9.0 software

Table 2. Regression results (OLS method) Dependent variable: Lmd Coefficient t-stat Prob C -0.52 -1.297 0.2117 Lpdpm 0.83 -1.982 0.0632 lmd(-1) 0.57 2.875 0.0105 DW = 2.12 Ad.R2= 0.45 96 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

OVERVIEW OF CURRENT FOREST FINANCIAL FLOWS IN MONGOLIA

Ganzorig Gonchigsumlaa1 and Camille Bann2 1 Doctor, Senior Lecturer, school of Economics and Business, Mongolian University of Life Sciences, Ulaanbaatar, Mongolia, Email: [email protected]

2 Doctor, independent Consultant, London, United Kingdoms, Email: [email protected]

Abstract The forest sector in Mongolia faces with having low level of finance for implementing the Sustainable Forest Management (SFM) which is to protect the forest by utilizing the forest and non-forest products sustainably, enabling to contribute to the local economy. This study focuses on forest related financial flows. Financial flows as defined in this paper cover: (i) financial inflows in support of forest conservation and utilization and use by public, private and donor entities; and, (ii) financial outflows - financial revenue from forest utilization by private entities in the form of fees and taxes and penalties for mis-use of the forest resource which flow back into Government budgets, and revenue from the wood processing and production sector. The analysis shows that total financial inflows into forest conservation and utilization was around MNT 440 billion (US$ 220 million) in 2017. Between 2013-2017, around 92% of financial inflows were from private sector investments, 5% from the Government of Mongolia and 3% from donors. The total revenue generated from forestry in 2017 was around MNT 157 billion (US$ 78 million). The government captures around 26% of this total revenue, the rest is net profit to the private sector. In 2017 total Government funding for SFM was around MNT 12,808 million (US$ 6.4 million), compared to Government forest related revenues of MNT 51,289 million (US$ 25.6 million) suggesting that increased Government funding for SFM is possible through better earmarking of forest generated revenues.

Key words: Financial flows, inflow, outflow, fees, taxes, charges, cost, revenue

INTRODUCTION Mongolia’s UN-REDD National programme1 Forests in Mongolia can be divided into two is supporting the Government to design and types: 1) the northern, mainly coniferous, forests of implement its National REDD+ Strategy and to the forest-steppe, boreal forest and mountain zones; meet the requirements under the United Nations and 2) the Saxaul shrub lands of the southern desert Framework Convention on Climate Change and desert steppe. Mongolia’s boreal forest area Warsaw Framework to receive REDD+ results- covers 13.1 million ha [1] and includes 9.3 million based payments. hectares of well-stocked forest. These forests are Sustainable Forest Management (SFM) is largely comprised of Siberian larch, pines and birch an important issue for Mongolia. The ecosystem forests with an average volume of approximately services provided by Mongolia’s forests, such as 164 cubic meters [1]. Mongolia’s boreal forests timber, non-timber forest products, water regulation, are affected by various drivers of deforestation and carbon sequestration, disaster mitigation, tourism degradation, including human induced forest fire, and cultural services, support livelihoods and insect pests and grazing, and environmental factors underpin key sectors of the economy such as often linked to climate change, which result in agriculture, industry and tourism2. SFM can support precipitation change, permafrost melting, drought 1 The UN-REDD Programme is the United Nations and an increased risk and vulnerability to fires and Collaborative Initiative on Reducing Emissions from pests. Deforestation and Forest Degradation (REDD+) in developing countries (http://reddplus.mn/eng/). 2 A study in 2013 estimated the economic value of boreal forest goods and services at MNT 431.5 billion (US$310 million) a year or an average of MNT 42,900/ha (US$ SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 97 delivery of the Sustainable Development Goals resources (forest carbon stocks and biodiversity), (SGDs), most directly - Goal 1 to end poverty, Goal helping to reverse land degradation, promoting 8 creation of employment opportunities, Goal 10 the improvement of rural livelihoods and aiding to reduce inequality, Goal 13 to combat climate adaptation to climate change. change and Goal 15 to sustainably manage forests Based on National Statistics Office data, the and combat and reverse land degradation. However, Gross Domestic Product (GDP) of the forestry given that the SDGs represent a deep web of inter- sector is estimate at MNT 141.8 billion (2017)3, relationships and dependencies, where progress 0.5% of Mongolia’s GDP in 2017 [7]4. Since toward one goal can enhance progress on others [2], 1990, Mongolia’s forest policy has promoted the potential role of SFM in supporting delivery of conservation, with little support and investment in the 2030 Development Agenda is significant. silviculture and the forest industry. However, the SFM aligns with a number of key development recent National Forest Inventory (NFI) suggests and policy challenges facing Mongolia, namely: that an increased utilization of the forest would be (i) adaptation to climate change through building compatible with SFM [8]. There is an on-going ecosystem resilience and supporting alternative discussion around the pros and cons associated livelihoods; (ii) reducing air pollution through the with greater forest utilization. Some people are use of wood based fuel instead of coal. Reducing concerned that signals in favor of utilization would air pollution is a policy priority given that lead to unmanaged and chaotic harvesting given Ulaanbaatar is one of the world’s most polluted the lack of effective monitoring. There are also cities - PM2.5 can reach levels well above 1,000 several barriers to developing the forestry industry micrograms per cubic meter in ger areas in the including the capacity to harvest and process value winter, 40 times the maximum recommended by added products, a lack of detailed assessments of the World Health Organization [3]. According to market demand to guide investment decisions and the Ministry of Environment and Tourism (MET) competition from global markets and neighboring Mongolia plans to ban the burning of low-grade countries. Nonetheless, the majority view is that coal in Ulaanbaatar within a decade [3] ; and, (iii) a successful self-financing private sector could be employment generation and revitalization of rural developed in a step-wise fashion. This could result areas through increased utilization of the forest in multiple benefits including - an increase in the and development of market enterprises. This could Government’s revenue base and hence financing help sustain traditional lifestyles in rural areas and to support /enhance the forest in the future, have the important benefit of reducing migration to employment in rural areas which can help address Mongolia’s capital Ulaanbaatar, which is facing a poverty, increased resilience to climate change number of urban development problems linked to through the provision of alternative/ supplementary an increasing population, limited infrastructure, income to animal husbandry, regeneration of rural unplanned development and extreme air pollution areas and reduced air pollution if wood is used to issues. replace coal. The Government of Mongolia (GoM) has committed to a green development path, notably through the preparation and approval of the Green Development Policy [4], Policy on Forests [5], and Policy on Sustainable Development Vision in Mongolia-2030 [6]. Its Sustainable Development Vision, among other objectives, commits Mongolia 3 MNT 60.3 billion for the forestry sector and MNT 81.5 to reduce greenhouse gas emissions by 14% by billion for wood processing and production for, that is 2030, and talks about a country with no poverty. (the total value added of the sector). to ten Economy REDD+ has the potential to contribute to green of Mongolia. ributions of Ecosystem Services of the development by protecting global environmental Network of Protected Areas ively high emissions of greenhous 31) (UN-REDD 2013a). This is a partial analysis based 4 Mongolia’s GDP is around US$ 11.2 billion, or MNT on rough estimates and conservative assumptions. 27,182.4 billion[7]. 98 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

METHOD organizations. The main methodological steps The assessment of potential financing undertaken are presented in Figure 1. A series of mechanisms to support implementation of the bilateral and focus group meetings on current and REDD+ Action Plan is based on an extensive potential financing mechanisms were undertaken to literature review, stakeholder consultations and inform the draft findings, both prior to and during financial data collected from key Government the project mission (November 2017).

Figure 1: Overview of Approach

REPORTING / ANALYSIS LITERATURE REVIEW VALIDATION CONSULTATIONS & WORK PLANNING WORKSHOP - Data Collection -Bi-lateral meetings Financial flows analysis -Literature Review Recommendations on -Focus groups - Assessment of potential -Mission preparation financial mechanisms to financing mechanisms support REDD+ Oct / Nov 2017 Oct/Nov 2017 Oct / Nov /Dec 2017 Dec / Jan 2018

Source: Authors’ Figure

The data and information for the analysis between 2013 and 2017 [10]. of forest financial flows was generated through This study was undertaken over a 4-month a number of sources, including the Ministry of period (October 2017 – January 2018). The study Environment and Tourism (MET), the National covers forest related financial flows, it does not Emergency Management Office (NEMA), the consider agricultural financial flows, as agriculture Ministry of Food, Agriculture and Light Industry is not a key driver of deforestation and forest (MOFALI), the National Statistics Office of degradation in Mongolia. Mongolia (NSO), Aimag/capital Government offices and development projects. RESULTS AND DISCUSSIONS The MET (2013) has an approved template to record forest budget expenditure and revenue data Financial Inflow called “Forest Information Sheet-7 (FI-7)” [9]. This In 2017, total financial inflows into forest was requested from the departments of environment conservation and utilization was calculated at MNT and tourism of all 21 aimags in Mongolia, plus 440 billion (US$ 220 million). Between 2013 and Ulaanbaatar capital city5 to inform this study. 2017, average annual financial inflows were around However, it is evident that this monitoring MNT 274 billion (US$ 137 million) (total financial mechanism is not working effectively as the template inflows are presented in Table 1). is generally not filled out properly and there is no Ninety-one-point eight percent of MNT 274 designated authority to collect the data captured billion was (MNT 252 billion, US$ 126 million) in the templates. The FI-7 categorizes costs and was from private sector investment, 5.4% (MNT 15 revenue and is consistent with the categorization billion, US$ 7 million) from the Government and of 12 types of key activities supported by the state 2.8% (MNT 8 billion, US$ 4 million) from donors budget developed by this study. Based on this (Figure 2). data local financial flows analyses were conducted

5 Ulaanbaatar city data is taken from two Government organizations - the Department of Environment and Tourism of Ulaanbaatar city administration office and the Department of Urban Landscape and Waste Management of Mayor’s office of Ulaanbaatar. The first is in charge of forestry and forest conservation outside of the city and the second within the city. The data for both areas has been aggregated into one for Ulaanbaatar city. RESULTS AND DISCUSSIONS

Financial Inflow In 2017, total financial inflows into forest financial inflows were around MNT 274 conservation and utilization was calculated at billion (US$ 137 million) (total financial MNT 440 billion (US$ 220 million). inflows are presented in Table 1). Between 2013 and 2017, average annual

Table 1. Financial inflows to the forest (Million. MNT)

Forest expenditures by types of № Row ID 2013 2014 2015 2016 2017 organizations SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 99 1 MET A 6,126.5 5,235.1 6,201.4 3,104.2 9,584.6 2 Govern-Table 1. FinancialState inflows NEMA to the forest (Million. MNT)B 0.4 2.1 7.1 1.3 205.5 3 ment Forestbudget expenditures MOFALI by types C 400.0 20,825.7 7,670.0 0 0 № Row ID 2013 2014 2015 2016 2017 4 (Million of organizationsTotal D=A+B+C 6,526.8 26,062.9 13,878.5 3,105.5 9,790.1 5 MNT)1 Local budgetsMET A E 6,126.5 2,782.65,235.1 3,008.26,201.4 3,083.03,104.2 9,584.62,763.3 3,018.0 6 Total F=D+E 9,309.4 29,071.1 16,961.5 5,868.9 12,808.1 2 State NEMA B 0.4 2.1 7.1 1.3 205.5 7 DevelopingGovern- partners-donors (Million MNT) G 2,371.6 3,984.4 7,726.5 11,960.5 12,528.0 3 budget MOFALI C 400.0 20,825.7 7,670.0 0 0 8 Private ment Forestry sector* H 29,425.6 60,985.8 66,521.0 78,409.8 99,192.3 9 sector4 (Million Wood processing andTotal productionD=A+B+C I 6,526.8 107,629.426,062.9 126,897.213,878.5 158,373.8 3,105.5 215,614.89,790.1 315,264.9 (Million5 MNT) Local budgets E 2,782.6 3,008.2 3,083.0 2,763.3 3,018.0 10 Total J=H+I 137,055.1 187,882.9 224,894.8 294,024.6 414,457.2 MNT)6 Total F=D+E 9,309.4 29,071.1 16,961.5 5,868.9 12,808.1 GRANDDeveloping TOTAL (Million partners-donors MNT) K=F+G+J 148,736.0 220,938.4 249,582.8 311,853.9 439,793.3 7 G 2,371.6 3,984.4 7,726.5 11,960.5 12,528.0 (Million MNT) Source: 8Authors’Private calculationsForestry sector* based on sourcesH 29,425.6described60,985.8 in next66,521.0 sections78,409.8 99,192.3 sector Wood processing and 9 I 107,629.4 126,897.2 158,373.8 215,614.8 315,264.9 Notes: *The(Million forestry production sector relates to the extraction of timber from the forest and initial processing10 suchMNT) as clearingTotal branches inJ=H+I preparation137,055.1 for187,882.9 processing224,894.8 and294,024.6 production. 414,457.2 GRAND TOTAL (Million MNT) K=F+G+J 148,736.0 220,938.4 249,582.8 311,853.9 439,793.3 Source: Authors’ calculations based on sources described in next sections Ninety-one-pointNotes: *The forestry eight sector percent relates to ofthe extraction MNT 274 of timber 5.4% from the (MNT forest and 15 initial billion, processing US$ such as7 million) from billion clearing was branches (MNT in preparation 252 billion, for processing US$ and 126 production. the Government and 2.8% (MNT 8 billion, million) was from private sector investment, US$ 4 million) from donors (Figure 2). Figure 2: Share of financial inflow to forest on average of 2013-2017, by sources (%)

NEMA 0.02%

Private sector: Forestry Donors 24.4% 2.8% MOFALI Local 2.1% budgets Government 1.4% 5.4% Private sector: Wood Process 67.4% MET 2.2%

Figure 2: Share of financial inflowSource: to Authors’ forest calculation on average based on of sources 2013-2017, described in by next sources sections (%) Source: Authors’Between calculation2013 and 2017,based totalon sourcesforest describedin 2014 and 2015in next due to sections high contributions from the expenditure shows an increasing trend, largely due MOFALI which related to the Government’s policy to the threefold increase in private sector spending to support industries with cheap loans. Betweenover 2013the period. and Possible 2017, explanations total for forest this PossibleFigure 3 shows explanations forest conservation for activities this increase expenditureincrease include shows thean expansion increasing in the domestic trend, financedinclude by the METexpansion between 2013 in theand 2017.domestic Based market largely market due related to to the the economic threefold growth, increase Government in onrelated DFPC budget to the items, economic 12 general growth,cost items haveGovernment policies such as import tax exemptions on wood been identified, into which the budget was divided private processing sector equipment spending and overimported the timber, period. and [11].policies The PAAD such and asDLMIWRPR’s import tax expenditures exemptions on MOFALI’s cheap loan policies through Chinggis 4were included to the relevant cost items to derive bond, discussed further below. the total MET budget by forest activity. Government funding has varied over the period, with the highest overall budgets occurring wood processing equipment and imported Figure 3 shows forest conservation activities timber, and MOFALI’s cheap loan policies financed by the MET between 2013 and through Chinggis bond, discussed further 2017. Based on DFPC budget items, 12 below. general cost items have been identified, into Government funding has varied over the which the budget was divided [11]. The period, with the highest overall budgets PAAD and DLMIWRPR’s expenditures occurring in 2014 and 2015 due to high were included to the relevant cost items to contributions from the MOFALI which derive the total MET budget by forest 100related | SCIENTIFIC to the Government’s JOURNAL-AGRICULTURAL policy to support ECONOMICS activity. - 2018 industries with cheap loans. Figure 3: MET budget allocations by forestry and forest conservation activity (Million MNT)

Million Forest pest and disease control Reforestation and Rehabilitation MNT Regrowth/nursery and seedling/sapling Forest treatment (thinning) and cleaning 9,585 10,000 Forest fire monitoring, precaution, and fighting Forest inventory management FUGs, FUs, FEs, and development of Forest MPs Trainings, advocacy, research & monitoring 9,000 Forest seed breeding Equipment Combating with illegal logging Other 8,000 Total

7,000 6,126 6,201 6,560

6,000 5,235

5,000

4,000 3,104 3,278

3,000 2,387 1,983 1,627 2,000 1,558 1,364 1,225 1,151 822 534 525 509 462 459 447

1,000 434 345 317 303 295 290 236 222 220 200 167 160 155 155 152 124 123 124 122 120 110 105 95 94 94 92 83 80 73 63 57 54 39 19 9 11 8 9 0 1 1 1 1 0.2 0 2013 2014 2015 2016 2017 Figure 3: MET budget allocations by forestrySource: and forest Authors’ conservation calculation based activity on data (Million of [11] and [12] MNT)

Source:From Authors’ 2013 to calculation2017, on average based on MNT data of6.05 [11] andtimes [12] compared to the previous three years’ annual billion (US$ 3 million) a year was spent on forests average budget. The main reason for this increase is From 2013 to 2017, on average MNT 6.05 2013 and 2017, about 43% on average from the MET budget (Figure 3). The MET that the6 2016 budget for pest control was relatively forestbillion budget (US$ shows 3 million) an increasing a year was trend, spent with on the (Figurelow, 3)MNT. 525 million (US$ 262,000), and forests from the MET budget (Figure 3). The exception of 2016, due to a decision by the MET Thecorrelated MET allocates with a budgetnotably for higher pest controlpest incidence to in MET forest budget shows an increasing the FRDC, and the FRDC procure and the Ministry of Finance (MoF) to reduce the the following year. This resulted in complaints to trend, with the exception of 2016, due to a Professional Forest Enterprises (PFE) to budgetdecision for forest by the pest MET and disease and the control Ministry (referred of carrylocal out administration the pest control offices, activities. MET and Pest parliament to Financehereafter (MoF) as ‘pest to control’). reduce theIn 2017, budget the fortotal controlmembers, is expensive prompting because an of increasethe high costin budget 7 METforest budget pest and for diseas foreste increased control (referred significantly to of allocations imported chemicals, in 2017 . which must comply comparedhereafter to as previous ‘pest control’). years, dueIn 2017, to an theadditional total with The environmental allocated budget standards for pest control and activities MNTMET 3.5 budget billion for (US$forest 1.7increased million) significantly approved in transportationreportedly covers(e.g. hiring about planes). 30-40% of the total area November,compared 2017 to for previous pest control years, on top due of tothe antotal In 2017needing the treatment,budget for hence pest control, there is MNT a view 6.6 that the budgetadditional approved MNT in 3.5 February billion 2017 (US$ of 1.7 around million) MNT billionbudget (US$ for 3.3pest million),control is increased not enough by 3.2(interview 5.8approved billion (US$ in November, 2.9 million). 2017 for pest control timeswith compared Mr. B.Ganzorig, to the previousPest control three officer years’ at FRDC). on The top budget of the for total pest control budget accounts approved for in the annualHowever, average there budget. may be The more main cost-effective reason for methods biggestFebruary proportion 2017 ofof aroundthe total MNT MET 5.8 budget billion for thisthat increase could isbe that adopted the 2016 that budget would for help pest increase forest,(US$ ranging2.9 million). from 17-68% between 2013 and controlcoverage, was relatively while there low, is alsoMNT a view525 millionthat the forest The budget for pest control accounts for the (US$ 262,000), and correlated with a notably 2017, about 43% on average (Figure 3)6. protection policy that has prevailed since the 1990s biggest proportion of the total MET budget The MET allocates budget for pest control may have made the forest more attractive to pests. for forest, ranging from 17-68% between 6 Based on data for 2013-2017, on average most of the pest to the FRDC, and the FRDC procure Professional controlDeadwood, budget is utilized lying for oncontrol the measurements ground, and (86.6%), dense forested Forest Enterprises (PFE) to carry out the pest the restareas is used attract for monitoring the pests and andresearch are of more the pests vulnerable to (11.4%). control activities. Pest control is expensive because5 fire. Therefore, an increase in sustainable forest of the high cost of imported chemicals, which utilization could result in a lower pest incidence. must comply with environmental standards and The area lost to forest fire varied between transportation (e.g. hiring planes). 157 - 45,649 hectares between 2010 and 2016, In 2017 the budget for pest control, MNT but was very high in 2017 at 120,918 hectares, 6.6 billion (US$ 3.3 million), increased by 3.2 thus the NEMA’s budget expenditure increased significantly in this year. MNT 205.5 million (US$ 6 Based on data for 2013-2017, on average most of the pest control budget is utilized for control measurements 7 Interview with B.Ganzorig, FRDC and Kh.Batjargal, (86.6%), the rest is used for monitoring and research of Head of Department of Public Administration and Man- the pests (11.4%). agement at MET. wood processing equipment and imported Figure 3 shows forest conservation activities timber, and MOFALI’s cheap loan policiesSCIENTIFIC financed JOURNAL-AGRICULTURAL by the MET betweenECONOMICS 2013 - 2018 and | 101 through Chinggis bond, discussed further 2017. Based on DFPC budget items, 12 102.6below. thousand) was spent on fighting forest fires generaltotaling costMNT items 28.9 have billion been (US$ identified, 14.4 million) into in in 2017Government [13]. funding has varied over the which2013-2015, the budgetMNT 400 was million divided (US$ [11]. 200,000) The in period,Under this with “Chinggis the highest Bond”, overall the MOFALI budgets PAAD2013, MNT and 20,825.7 DLMIWRPR’s million (US$ expenditures 10.4 million) financedoccurring 51 wood in 2014processing and 2015projects due (benefitting to high werein 2014, included and MNT to the7,670 relevant million cost (US$ items 3.8 million) to 31 companiescontributions and from20 individuals) the MOFALI with whichloans derivein 2015, the calculation total MET was based budget on unpublished by forest data related to the Government’s policy to support activity. industries with cheap loans. Figure 4: Local budget expenditure by forestry and forest conservation activity (Million MNT) Million Forest pest and disease control Reforestation and Rehabilitation MNT Regrowth/nursery and seedling/sapling Forest treatment (thinning) and cleaning 9,585 10,000 Forest fire monitoring, precaution, and fighting Forest inventory management FUGs, FUs, FEs, and development of Forest MPs Trainings, advocacy, research & monitoring 9,000 Forest seed breeding Equipment Combating with illegal logging Other 8,000 Total

7,000 6,126 6,201 6,560

6,000 5,235

5,000

4,000 3,104 3,278

3,000 2,387 1,983 1,627 2,000 1,558 1,364 1,225 1,151 822 534 525 509 462 459 447

1,000 434 345 317 303 295 290 236 222 220 200 167 160 155 155 152 124 123 124 122 120 110 105 94 95 94 92 83 80 73 63 57 54 39 19 9 11 8 9 0 1 1 1 1 0.2 0 2013 2014 2015 2016 2017 Source:Figure Based 3: onMET unpublished budget rawallocations data collected by forestry from Departments and forest of conservationEnvironment and activity Tourism (Million of Aimags and MNT) Capital City using FI-7 template in 2017 [10]

[14]8Source:. The cheap Authors’ loan iscalculation terminated based in 2016, on databy the of [11]The and expenditure [12] of private sector in 2017 is about new Government who judged that the economic 10 times higher than the MET budget. returnsFrom from 2013 the loans to 2017, were ontoo average low. MNT 6.05 2013 The and calculated 2017, aboutexpenditure 43% on on wood average processing 6 billionAimags (US$ and the 3 million)capital city a year spent was about spent MNT on (Figureand production 3) . for private sector shows a sharp 2.8-3.0forests billion from (US$ the MET1.4-1.5 budget million) (Figure for forestry3). The Theincrease MET over allocates the past budget four years,for pest possibly control reaching to and METforest forestconservation budget activities shows anat local increasing level theMNT FRDC,315 billion and (US$ the 157 million) FRDC in procure 2017 based betweentrend, 2013 with and the 2017; exception the trend of is 2016, stable due (Figure to a Professionalon extrapolated Forest data [16, Enterprises 17]. The category (PFE) ‘wooden to decision by the MET and the Ministry of carry out the pest control activities. Pest 4) , calculation was based on unpublished data [10]. products and cork’ accounts for 67% of the total Finance (MoF) to reduce the budget for control is expensive because of the high cost forestCompared pest to and state diseas budgete expenditure control (referred by MET, to ofexpenditure imported of chemicals, wood processing which must and comply production NEMAhereafter and MOFALI, as ‘pest control’).local budget In 2017,expenditure the total is withsector on environmental average of 2010-2017, standards paper and and paper aroundMET 39% budget of the for state forest budget increased for the periodsignificantly 2013- transportationproducts 19% (e.g.and furniture hiring planes). production 14%. 2017.compared to previous years, due to an In 2017 the budget for pest control, MNT 6.6 additionalIn 2017, donor MNT projects 3.5 billion contributed (US$ 1.7 MNT million) 12.5 billionFINANCIAL (US$ 3.3 million), OUTFLOW increased by 3.2 billionapproved (US$ 6.2 in million) November, to forest 2017 related for pest activities, control times compared to the previous three years’ the higheston top in oflast thefive total years budgetand higher approved than MET in annualThe average total revenuebudget. generatedThe main from reason forestry for in budgetFebruary allocation 2017 for ofthe aroundforest of MNT MNT 5.89.6 billion this2017 increase was calculated is that the at 2016around budget MNT for 157 pest billion (US$(US$ 4.8 million) 2.9 million). in 2017, calculation was based on control(US$ 78 was million). relatively Revenue low, MNT from 525 the million forest has unpublishedThe budget data for[15]. pest control accounts for the (US$increased 262,000), year on and year correlated over the with period a notably 2013-2017, biggest proportion of the total MET budget Private sector expenditure on forestry mainly driven by the increase in private sector for forest, ranging from 17-68% between 6 increased from MNT 44 billion (US$ 22 million) in revenue, Based on data especially for 2013-2017, associated on average with most theof the processing pest control budget is utilized for control measurements (86.6%), 2010 to MNT 99 billion (US$ 49 million) in 2017, thesector rest is (Table used for 2).monitoring and research of the pests (11.4%). calculation was based on unpublished data [16]. 5 Total revenue generated by the public sector (Government), through forestry fees, charges and 8 Report by Mrs. D.Enkhbayar, officer for wood processing sector at Department for Coordination of taxes, was calculated at MNT 51.3 billion (US$ 25.6 Light Industry Policy Implementation, MOFALI. million) in 2017. Around MNT 11.2 billion (US$ 102 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Table 2. Financial outflows from the forest (Million. MNT) Type of revenue (organization) № Column ID 2013 2014 2015 2016 2017 rom forest

1 Forest A 2,867.9 2,583.5 2,668.6 2,478.7 4,116.9 Natural 2 resource NTFP B 250.4 1,057.4 2,554.3 5,731.9 6,759.5 use fee 3 Total C=A+B 3,118.3 3,640.8 5,222.9 8,210.6 10,876.5

Local Charges of 4 budget compensations for D 353.4 327.6 149.7 91.1 207.2 forest damages Revenue of selling of 5 E 80.3 87.4 96.0 121.1 152.1 seedlings and saplings 6 Total F=C+D+E 3,552.0 4,055.9 5,468.6 8,422.8 11,235.8 Revenue of fee 7 permits for forest G 82.6 38.2 43.1 50.0 41.4 enterprises MET Pine nuts export 8 budget H 0 0 4,113.5 7,269.8 23,741.4 license fee 9 Total I=G+H 82.6 38.2 4,156.6 7,319.8 23,782.8

Government (Million MNT) Revenue of fines for illegal ECF 10 logging as an J 210.1 199.4 506.3 210.1 281.5 budget environmental crime

11 Tax Forestry K 485.6 1,480.4 1,622.9 2,031.4 2,670.4 revenue Wood processing 12 from L 4,499.4 5,450.2 6,877.2 9,045.0 13,319.4 and production private 13 sector Total M=K+L 4,985.1 6,930.5 8,500.1 11,076.5 15,989.7 N=F+I+ 14 Total 8,829.9 11,224.0 18,631.7 27,029.2 51,289.8 J+M 15 Forestry O 11,427.6 16,703.1 18,098.7 19,588.0 23,298.7 Private sector Wood processing and 16 P 29,024.8 35,093.1 44,326.1 55,661.9 82,360.2 (Million production MNT) 17 Total Q=O+P 40,452.4 51,796.2 62,424.7 75,249.9 105,658.9

GRAND TOTAL (Million MNT) R=N+Q 49,282.2 63,020.2 81,056.4 102,279.1 156,948.8

Source: Authors’ calculation based on sources described in next sections

5.6 million) accrued to local Governments (mostly crimes, and state and local tax offices MNT 16.0 from natural resource use fee). The MET accrued billion (US$ 8 million) from taxes paid by the MNT 23.8 billion (US$ 11.9 million) mostly from private sector for forestry, wood processing and pine nuts export licenses, the ECF MNT 0.3 billion production. (US$ 0.14 million) from payments for forest related SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 103

Figure 5: Share of financial outflows from the forest by type of beneficiaries (%) (average for 2013-2017) Reforestation and Rehabilitation Forest pest and disease control Equipment Trainings, advocacy, research & monitoring Million. Forest seed breeding Forest treatment (thinning) and cleaning MNT Other Total 3,500 3,008 3,083 3,018 3,000 2,783 2,763

2,500 2,184 2,184 2,030 2,030 1,823 2,000 1,873 1,441 1,441 1,500

1,000 771 656 656 529 529 475 475 341 341 303 303 274 273 273 241

500 217 198 198 156 156 136 136 134 108 108 57 54 53 49 48 41 33 29 22 22 20 18 17 18 9 0 2013 2014 2015 2016 2017

Source: Authors’ calculation based on data sources [10, 16-21] Figure 4: Local budget expenditure by forestry and forest conservation activity (Million The Government captures about 26% of MNT)the required that relies less on Government funding and total financial outflow from the forest, on average draws more on private sector finance. forSource: 2013-2017, Based of onwhich unpublished taxes from raw the data private collected fromIn terms Departments of Government of Environment finance, and given the sectorTourism account of forAimags 10.5% and (Figure Capital 5). City The mainusing share FI-7 templatecurrent in fiscal 2017 [10] constraints facing the Government, of forest revenue (74%) accrues to the private sector, initial actions to enhance forest finance should be Compared to state budget expenditure by unpublished data [16]. The expenditure of i.e., 54.5% for wood processing and production and placed on improving the implementation of existing MET, NEMA and MOFALI, local budget private sector in 2017 is about 10 times 19.7%expenditure for forestry is [16–18]. around Interestingly 39% of the the state share highermechanisms than the such MET forest budget. use fees. In 2017 total of budgetGovernment for the revenue period 2013-2017.has increased from 18% TheGovernment calculated funding expenditure for SFM was on around wood MNT in 2010In 2017, to 33% donor in 2017. projects This contributedincrease is identified MNT processing12,808 million, and production compared to for forest private related sector revenues in 12.5the MET billion budget (US$ as due 6.2 to million) the increase to forestof pine showsof MNT a sharp 51,289 increase million over suggesting the past fourincreased nutsrelated export activities, license feesthe highest [20, 21]. in last It suggests five years that years,Government possibly funding reaching for MNTSFM is 315 possible billion through Governmentand higher revenue than MET might budget not be allocation that high for in (US$better 157earmarking million) of inforest 2017 generated based revenues. on comingthe forestyears when of MNT there is 9.6 no pine billion nut (US$harvest. 4.8 extrapolatedThere is also data scope [16, for 17].EFR, Thenamely category diversifying million) in 2017, calculation was based on ‘woodenand increasing products forest and related cork’ accountscharges (including for unpublishedCONCLUSION data [15]. 67%protected of thearea total fees) expenditure and removing of wood perverse PrivateSFM aligns sector with expenditure a number onof Mongolia’s forestry processingincentives and(such production tax exemptions sector on importedaverage logs) policyincreased priorities. from There MNT 44are billionopportunities (US$ 22for ofthat 2010-2017, constrain paperthe domestic and paper timber products industry. 19% million) in 2010 to MNT 99 billion (US$ 49 and furniture production 14%. including forestry as part of the short-term strategy million) in 2017, calculation was based on to address air pollution; this could be encouraged ACKNOWLEDGEMENT throughFinancial financing Outflow and incentives for using wood to The authors are thankful to the Mongolia’s replace coal. Forest finance can also be targeted at UN-REDD National programme for funding this enablingThe total adaptation revenue togenerated climate change,from forestry especially in periodstudy and 2013-2017, Ministry of mainly Environment driven and by Tourism the for in 2017rural areas was through calculated alternative at around job MNTcreation 157 and increasetheir fruitful in private comments sector andrevenue, technical especially assistances, buildingbillion climate (US$ resilience. 78 million). Revenue from the associatedand local with administration the processing offices sector at (Table aimags/capital forestHowever, has increased three key year inter-related on year overbarriers the to 2).and Ulaanbaatar city major’s office for sending the SFM are evident – there is insufficient funding for primary data. Table 2. SFM, low incentives areFinancial in place outflows for FUGs from and the forest (Million. MNT) there are a range of barriers hindering business REFERENCES development№ Type ofby revenue private (organization) enterprises. from forest Column ID[1] 2013 FRDC, 2014 “Forest 2015 resource 2016 of Mongolia: 2017 1 Forest A 2,867.9 2,583.5 2,668.6 2,478.7 4,116.9 Government Natural resource 2 To increaseLocal and build the sustainabilityNTFP B of 250.4For 1,057.4 Official 2,554.3 use,” 5,731.9 Forest 6,759.5 Research (Million use fee 3 budget Total C=A+B 3,118.3 3,640.8 5,222.9 8,210.6 10,876.5 forest financingMNT) a more diversified funding base is and Development Center, state owned 4 Charges of D 353.4 327.6 149.7 91.1 207.2 7

104 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

enterprise, Ulaanbaatar, Mongolia, 2016. Environment and Tourism, Mongolia, [2] UNDESA, “Report of the Capacity- Ulaanbaatar, Mongolia, 2017. Building Workshop and Expert Group [13] NEMA, “Unpublished raw data fore Meeting on Integrated Approaches to budget expenditure for forest and steppe Sustainable Development Planning and fire fighting,” National Emergency Implementation: 27–29 May 2015,” Management Agency, 2017. United Nations Department of Economic [14] D.Enkhbayar, “Unpublished report on and Social Affairs, New York, 2015. Report on investment and discounted loans [3] Terrence Edwards, Mongolian capital to for forestry and wood processing sector in ban low-grade coal to ease smog: Reuters, 2013-2015,” Department for Coordination 2017. of Light Industry Policy Implementation, [4] Parliament of Mongolia, Green MOFALI, Ulaanbaatar, Mongolia, 2017. Development Policy of Mongolia, 2014. [15] Ministry of Finance, “Unpublished data [5] Parliament of Mongolia, Policy on for development projects in Mongolia,” Forests, 2015. Ulaanbaatar, Mongolia, 2016. [6] Parliament of Mongolia, Sustainable [16] NSO, “Unpublished data of total Development Vision in Mongolia-2030, consumption, value added and production 2016. of forestry sector in Mongolia,” National [7] IMF, “IMF World Economic Outlook Statistics Office, Ulaanbaatar, Mongolia, 2016, cited by Global Finance,” 2017. International Monetary Fund, 2017. [17] NSO, “Unpublished disaggregated data of [Online] Available: https://www.gfmag. Input-Output Table of Mongolia in 2015,” com/global-data/country-data/mongolia- National Statistics Office, Ulaanbaatar, gdp-country-report. Mongolia, 2017. [8] NFI project, “National forest inventory of [18] NSO, Mongolian Statistical Yearbooks: Mongolia,” GIZ and REDD+, Ulaanbaatar, Gross Industrial Output (Million MNT). Mongolia, 2016. Ulaanbaatar, Mongolia, 2008-2017. [9] MET, Annex 3 to the Order A-53 of [19] Environmental information Center Minister of Environment and Tourism: at NAMEM, “EIC: Online data for Regulations regarding accounting, forms Environmental Crimes, www.eic.mn,” of report, and their filling instructions of National Agency for Meteorology and forest information database, 2013. Environment Monitoring, Ulaanbaatar, [10] Departments of Environment and Tourism 2017. [Online] Available: http://www.eic. of Aimags and Capital City, “Unpublished mn/. data of Forest Information Sheet-7,” 2017. [20] DENRM of MET, “Unpublished report [11] MET, Order of the Minister for budget on introduction of pine nuts: Exports and allocation for forestry and forest challenges,” Department of Environment conservation: 2013 A-91, 2014 A-41, 2015 and Natural Resources Management of A-44, 2016 A-26, 2017 A-17 and A-308. MET, 2017. Ulaanbaatar, Mongolia, 2013-2017. [21] Ul-Oldokh, MET, “Unpublished raw [12] PAAD and DLMIWRPR, “Unpublished data of revenues collected at MET from data of budget expenditure for forestry and fee of forest enterprise permits and pine forest conservation activities,” Ministry of nuts export license,” One Window Service Point of MET, 2017. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 105

PREREQUISITES FOR ECOTOURISM DEVELOPMENT IN BOSTANLIK DISTRICT (UZBEKISTAN)

ELENA HORSKA1, KHABIBULLO PIRMATOV1, ALIM PULATOV2

Slovak University of Agriculture in Nitra, Slovakia1 Tashkent Institute of Irrigation and Agricultural Mechanization Engineers, Uzbekistan2

Abstract Uzbekistan is aimed at the development of all kinds of the tourist services market in order to further transform tourism into the competitive sector of the national economy. Particularly, ecotourism development provides both nature protection and income generation. The goal of this paper is to analyze the natural objects of Bostanlik district such as flora, fauna and landscapes, which are prerequisites for developing ecotourism. Moreover, authors provide practical recommendations for further development ecotourism in this district based on Slovakia experience. From the social point of view, ecotourism development contributes to leading a healthy lifestyle as well as enhancing ecological education. From economic perspective, it can increase local people’s income and improve their living conditions.

Key words: Bostanlik district, development, ecotourism, flora, fauna, landscapes, Uzbekistan.

INTRODUCTION Average January temperature goes lower than -6С, Ecotourism is one of tourism forms, which but average of July rises higher than +32С. develops at the fastest pace in the world. Its annual On the territory of Uzbekistan, there are growth rate is estimated from 10-20 to 30%, while more than 7000 art and architecture monuments the share of revenues from international tourism from different eras and civilizations (Karimov, reaches 10-15% (Kuskova & Djaladyan, 2008). 2014). Bostanlik district is one of the ecotourism Ecotourism is popular among those tourists, who destinations in Uzbekistan located in the north- are concerned about environment and would like eastern part of Tashkent region and its territory to explore more about local culture. This type of equals 4,93 thousand sq. km. The highest point tourism does not require large-scale effort and big is Mount Beshtor. Its peak rises to 4291 m. investment, but it should be monitored in order not above sea level (UNE, 2008). Bostanlik district to destroy the delicate balance of the nature. is surrounded by the Tien-Shan mountain ranges Ecotourism in Uzbekistan has significant in the north-western and eastern parts and Ugam- development potential, as it is associated with Chatkal National Park. The administrative center the presence of a large number of unique natural is Gazalkent, which is 58 km far from the capital features (deserts, steppes, mountains and valleys) city of Uzbekistan - Tashkent. The district has a as well as a rich cultural and historical heritage. great potential for developing ecotourism due to The climate of the country is mostly middle attitude its beautiful landscapes, diverse flora and fauna desert-continental. The difference of temperatures (Fig.1). depending on times of year is quite significant. Figure 1: Nature objects of Bostanlik district

Photo: Khabibullo Pirmatov, Ugam-ChatkalPhoto: NationalKhabibullo Park, Pirmatov, Uzbekistan, Ugam-Chatkal 2018 National Park, Uzbekistan, 2018 In Bostanlik district, Ugam-Chatkal gradually gaining height while moving National Park was established in 1990 on along axial ridges. The face of the the mountain spurs of the Western Tien Shan mountains is also changing to become in the area of 574.6 thousand hectares. 56.4 steeper and harsh. Separate rocky cliffs are thousand hectares covers forest, 177.3 replaced by ridges and peaks, shallow small thousand hectares occupies the pastures and rivers on foothills change into canyons and hayfields, 1.61 thousand hectares is irrigated rivers abounding length of several hundred land and the rest of the territory (329.4 kilometers: Ugam, Pskom, Chatkal and thousand hectares) is rocks and bare slopes. Akbulak. The juniper forests in mountain The national park was organized in order to slopes, the flood groves of the valleys and preserve the unique landscapes, using them gorges, alpine meadows in highlands as well for recreational purposes, as well as as no-melting snow caps define a unique streamlining the business of local land users flavor and charm of the mountains of the and landowners. Western Tien Shan. Area of the park is zoned into functional areas (thousand hectares): 2. Data and Methods - Agro park zone - 59.1; The Western Tien Shan is an attractive - Active recreation area - 30.7; destination for nature lovers due to a great diversity of landscapes, flora and fauna. - Adjustable recreation area - 13.6; There are at least 2200 species of plants - Protected zone - 35.8; found from Turan desert flora to the alpine - Equated to the protected zone - flora of the Pamir-Alai. Most of them belong 109.1; to the angiosperms and their numbers account for 2150 species. Moving to the - Area of the natural landscapes - highlands traveler crosses the five 326.1. vegetation zones: 700-1200 m - ephemeral It also allocates land forestry enterprises, vegetation, 1200-1500 m - deciduous trees specifically 322.6 thousand hectares for the and shrubs, 1500-2300 m - juniper, 2300- forest fund and 620 thousand hectares for 2800 m - thorny vegetation and mountain the silviculture. The territory of the National steppes above 2,800 m - alpine vegetation. Park as part of the West Tien Shan disposes Approximately 650 plant species are used in of various types of landscapes and natural medicine as well as 400 plant species can be monuments. Landscapes differ with a great used as food. The animal world of the variety: rolling foothills with gentle Western Tien Shan is also diverse (Table 1). topography and a small height difference are Table 1: Number of animal species in the Western Tien Shan Mammals Birds Reptiles Amphibians Fish 44 200 16 2 20 Source: Цой В.А., Аширов С.А. Западный Тянь-шань: путешествие к истокам, 2008 106 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

In Bostanlik district, Ugam-Chatkal National traveler crosses the five vegetation zones: 700-1200 Park was established in 1990 on the mountain m - ephemeral vegetation, 1200-1500 m - deciduous spurs of the Western Tien Shan in the area of trees and shrubs, 1500-2300 m - juniper, 2300-2800 574.6 thousand hectares. 56.4 thousand hectares m - thorny vegetation and mountain steppes above covers forest, 177.3 thousand hectares occupies 2,800 m - alpine vegetation. Approximately 650 the pastures and hayfields, 1.61 thousand hectares plant species are used in medicine as well as 400 is irrigated land and the rest of the territory (329.4 plant species can be used as food. The animal world thousand hectares) is rocks and bare slopes. The of the Western Tien Shan is also diverse (Table 1). national park was organized in order to preserve the unique landscapes, using them for recreational Table 1: Number of animal species in the Western Tien Shan purposes, as well as streamlining the business of local land users and landowners. Mammals Birds Reptiles Amphibians Fish Area of the park is zoned into functional areas 44 200 16 2 20 (thousand hectares): Source: Цой В.А., Аширов С.А. Западный Тянь- - Agro park zone - 59.1; шань: путешествие к истокам, 2008 - Active recreation area - 30.7; - Adjustable recreation area - 13.6; The most common and well-known fish - Protected zone - 35.8; in mountain rivers is a genus of cyprinid fish, - Equated to the protected zone - 109.1; schizothorax. The western species are typically - Area of the natural landscapes - 326.1. referred to as marinka from their Russian name, It also allocates land forestry enterprises, while the eastern species are usually called specifically 322.6 thousand hectares for the forest “snowtrout” (Global Species, 2018). They live fund and 620 thousand hectares for the silviculture. in the gullies and hollows rivers. Most fish are The territory of the National Park as part of the immigrants, acclimatized or randomly populated. West Tien Shan disposes of various types of Two species of amphibians in the Western Tien landscapes and natural monuments. Landscapes Shan are familiar. These are marsh frogs and green differ with a great variety: rolling foothills with toads. Marsh frogs are in the warm waters of lakes gentle topography and a small height difference are and along rivers. Green toads live in river valleys gradually gaining height while moving along axial up to snow fields. There are gray gecko, colorful ridges. The face of the mountains is also changing snake, desert lidless skink, water snake, glass-lizard to become steeper and harsh. Separate rocky cliffs in the foothills. Lark, corn bunting, stonechat can are replaced by ridges and peaks, shallow small be found in the foothills. Travelers can observe rivers on foothills change into canyons and rivers orioles, white-winged woodpecker, gray flycatcher, abounding length of several hundred kilometers: turtledove, wood pigeon, scops owl in deciduous Ugam, Pskom, Chatkal and Akbulak. The juniper forests. Juniper attracts grosbeak, accentor and owl. forests in mountain slopes, the flood groves of the In the high meadows and steppes, there are horned valleys and gorges, alpine meadows in highlands as lark, himalayan ular and accentor. Brown dove, well as no-melting snow caps define a unique flavor ptarmigan, black crow, kestrel and little owl can be and charm of the mountains of the Western Tien found on rocks and scree. Rare and exotic species Shan. is a paradise flycatcher, which nests in Chatkal reserve. As for mammals, they are common vole, DATA AND METHODS tolai hare, porcupine and badger in the dry steppes The Western Tien Shan is an attractive of lowlands. Turkestan rat, forest dormouse, forest destination for nature lovers due to a great diversity mouse, badger, wild boar, fox can be found in the of landscapes, flora and fauna. There are at least forests midlands. Siberian goats can be met on rocks 2200 species of plants found from Turan desert and scree. Marmota menzbieri lives on the reserved flora to the alpine flora of the Pamir-Alai. Most of area and it is listed in the Red Book of Uzbekistan. them belong to the angiosperms and their numbers Most of Ugam-Chatkal National Park is account for 2150 species. Moving to the highlands considered as a single mountain ecosystem of Chirchik river basin. There are several physiographic SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 107

complexes identified in landscape. The landscape vicinity is characterized by duality because, as to of wide river terraces and the slopes of the medium- the landscape, there are two very different areas. high mountains with apple forests and woodlands The first one are the Tribeč Mountains, the second cover the whole valley of Pskom. The relict forests (larger) one belongs to the Danubian Hills. This of walnut and maple are confined to the slopes of duality is present in the town of Nitra even more the mountains. The landscape of strongly dissected expressly. Its main characteristics is its location on slopes of the medium-high mountains with juniper the border of the hills and the lowland. A smaller, develops on the slopes Ugam, Pskom, Kuksuv and northern part of the town extends to Tribeč, the Chatkal ranging within absolute marks from 1200- significantly larger one stretches in a land of 1400 to 2000-2500 m. Alpine landscape with alpine roundish hills surrounding the valley of the river short grassy meadows covers the highest parts of Nitra. (TICN, 2018). The conditions created for watersheds Ugam, Pskom and Kuksuv ridges. ecotourism in Nitra can be also implemented in These areas are aligned space resembling almost Bostanlik district. plain. They are within subalpine and alpine zones Firstly, in order to inform tourists with all (up to 3500 m). Alpine landscape with fragments information on ecotourism, there is need to establish cryophytic meadows and steppes occupies the most a tourist information center and create its website. mountainous part of the headwaters of the river The center can offer a wide range of services such Pskom. as internet, guide, placing posters, selling city postcards, souvenirs, gifts, books, maps and so on. RECOMMENDATIONS AND Moreover, it is recommended to install information CONCLUSION columns and spots for introducing visitors about For further development of ecotourism in cultural events organized during their stay, place Bostanlik district, recommendations are provided and its surroundings, practical information, based on Slovakia experience, namely Nitra region. accommodations, food, transport services, weather The natural scenery of the Nitra region and its forecast (Fig. 2).

Figure 2: Tourism Information Spots

Photo: Khabibullo Pirmatov, Nitra, Slovakia, 2018 Photo: Khabibullo Pirmatov, Nitra, Slovakia, 2018 Secondly, near each cultural heritage there is can be reflected in medals, which are distributed Secondly, near each cultural heritage there is national symbols can be reflected in medals, a board, where detailed information is described at with the assistance of electronic machines. It is a board, where detailed information is which are distributed with the assistance of least in local and English languages. The information also necessary to open parking places for the described at least in local and English electronic machines. It is also necessary to board is equipped with Quick Response code (QR convenience of visitors with automobiles. Parking languages. The information board is open parking places for the convenience of code), which offers to read information via digital tickets can be obtained via P-SMS/automats, which equipped with Quick Response code (QR visitors with automobiles. Parking tickets code),gadgets. which Cultural offers monuments to read informationor national symbolsvia arecan functioning be obtained with via solar P-SMS/automats, energy (Fig. 3). which digital gadgets. Cultural monuments or are functioning with solar energy (Fig. 3). Figure 3: Commercial and non-commercial services for visitors

Photo: Khabibullo Pirmatov, Nitra, Slovakia, 2018 Thirdly, ecotourism destination should be the highest point, it is advisable to install illustrated in road signs, which are to present telescopes and panoramic pictures with the information on how much time required notes about surrounding objects. Taking to achieve a point by hiking and biking. account of local culture, tradition and nature, Local entrepreneurs can offer to rent the open and closed places for rest should be bicycles for tourists. The map of the national provided on the way of educational trails park with pointed places is also useful for (Fig. 4). visitors in order to have right orientation. On Figure 4: Touristic signs and places for rest 108 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Figure 3: Commercial and non-commercial services for visitors

Photo: Khabibullo Pirmatov, Nitra, Slovakia, 2018 Photo: Khabibullo Pirmatov, Nitra, Slovakia, 2018

Secondly,Photo:Thirdly, Khabibullo near ecotourismeach Pirmatov, cultural Nitra,destination heritage Slovakia, thereshould 2018 is be highestnational point, symbols it is advisable can be reflected to install telescopesin medals, and a board, where detailed information is which are distributed with the assistance of illustratedSecondly, innear road each signs, cultural which heritage are to present there isthe panoramicnational picturessymbols with can notesbe reflected about surrounding in medals, described at least in local and English electronic machines. It is also necessary to informationa board, onwhere how muchdetailed time requiredinformation to achieve is objects.which Taking are distributed account of with local the culture, assistance tradition of languages. The information board is open parking places for the convenience of adescribed point by hikingat least and biking.in local Local and entrepreneurs English andelectronic nature, themachines. open and It closedis also places necessary for rest to equipped with Quick Response code (QR visitors with automobiles. Parking tickets canlanguages. offer to rentThe bicycles information for tourists. board The map is of shouldopen be parking provided places on the for way the of educationalconvenience trails of code), which offers to read information via can be obtained via P-SMS/automats, which theequipped national with park withQuick pointed Response places codeis also (QRuseful (Fig.visitors 4). with automobiles. Parking tickets digital gadgets. Cultural monuments or are functioning with solar energy (Fig. 3). forcode), visitors which in order offers to haveto read right information orientation. On via the can be obtained via P-SMS/automats, which Figuredigital 3:gadgets. Commercial Cultural and non-commercialmonuments or services are for functioning visitors with solar energy (Fig. 3). Figure 4: 3: Touristic Commercial signs and and places non-commercial for rest services for visitors

Photo: Khabibullo Pirmatov, Nitra, Slovakia, 2018 Thirdly, ecotourism destination should be the highest point, it is advisable to install Photo: Khabibullo Pirmatov, Nitra, Slovakia, 2018 Photo: Khabibullo Pirmatov, Nitra, Slovakia, 2018 illustrated in road signs, which are to present telescopes and panoramic pictures with theThirdly, informationFourthly, ecotourism people on how preferdestination much to time travel shouldrequired with betheir suchnotesthe as highest about common surroundingpoint, and scientificit is advisableobjects. names, Takingto type,install diet, tofamily.illustrated achieve Therefore, ina roadpoint theresigns, by hikingis which need andareto pay tobiking. present attention averageaccounttelescopes lifespan, of local and size,culture, panoramic weight tradition can bepictures andinteresting nature, with for Localonthe childreninformation entrepreneurs educational on how canactivities, much offer time which to required improverent visitors.thenotes open Mostly aboutand closed spreadsurrounding places plants for and objects.rest animals should Taking in be the bicyclestheirto achieve knowledge. for tourists.a point Small The by zoo maphiking can of be the andorganized national biking. in a nationalprovidedaccount park onof have localthe to wayculture, mention of traditioneducational on ground and signs trailsnature, with parknationalLocal with entrepreneurspark, pointed where places visitors can is havealsooffer anuseful opportunityto forrent illustration(Fig.the 4).open (Fig. and 5).closed places for rest should be visitorstobicycles be acquainted in fororder tourists. towith have animals. The right map orientation.Facts of the about national animalsOn provided on the way of educational trails Figurepark with 4: Touristic pointed signsplaces and is placesalso useful for rest for (Fig. 4). visitors in order to have right orientation. On Figure 4: Touristic signs and places for rest SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 109

Figure 5: Information about animals and plants

Photo: Khabibullo Pirmatov, Nitra, Slovakia, 2018 Photo:Photo: KhabibulloKhabibullo Pirmatov,Pirmatov, Nitra,Nitra, Slovakia, Slovakia, 2018 2018 Fourthly,Fourthly,Last butpeoplepeople not least,preferprefer visitors toto traveltravel are withwitheducated theirtheir on andcommoncommon re-directing andand fees scientificscientific (entry fees, names,names, camping type,type, fees) diet,diet, or wastefamily.family. issues Therefore,Therefore, and contribute therethere toisis the needneed management toto paypay of displayaverageaverage boards, lifespan,lifespan, which illustratesize,size, weightweight how many cancan years bebe wasteattentionattention solutions onon childrenchildren in mountains. educationaleducational In order activities,activities, to prevent requiredinterestinginteresting for the for for disposal visitors. visitors. of organicMostly Mostly andspread spread non-organic plants plants thewhichwhich destruction improveimprove theiroftheir nature knowledge.knowledge. and degradation SmallSmall zoozoo of waste.andand animalsTheseanimals practices inin thethe causenationalnational visitors parkpark to have haveconcern toto environmentalcancan bebe organizedorganized quality inin aawith nationalnational waste, park,park, creative wherewhere best aboutmentionmention environmental onon groundground issues signssigns and protectwithwith illustration natureillustration from practicesvisitorsvisitors have havesuch an anas opportunity opportunitybring-back-your-waste toto bebe acquaintedacquainted policies waste(Fig.(Fig. (Fig.6). 5). 5). withwith animals.animals. FactsFacts aboutabout animalsanimals suchsuch asas FigureFigure 4: 5:5: Touristic InformationInformation signs and aboutabout places animals animalsfor rest and and plants plants

Photo: Khabibullo Pirmatov, Nitra, Slovakia, 2018 Photo: Khabibullo Pirmatov, Nitra, Slovakia, 2018 Photo: Khabibullo Pirmatov, Nitra, Slovakia, 2018 LastLast butbut notnot least,least, visitorsvisitors areare educatededucated onon environmentalenvironmental qualityquality withwith waste,waste, creativecreative wastewaste issuesissues andand contributecontribute toto thethe bestbest practices practices such such as as bring-back-your-waste bring-back-your-waste management of waste solutions in policies and re-directing fees (entry fees, management of waste solutions in policies and re-directing fees (entry fees, mountains. In order to prevent the camping fees) or display boards, which mountains. In order to prevent the camping fees) or display boards, which destruction of nature and degradation of illustrate how many years required for the destruction of nature and degradation of illustrate how many years required for the 110 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

The disposal of selected products: aluminum [3] Цой, В. А., & Аширов, С. А. (2008). cans – 15 years, plastic bags – 25 years, diapers – Западный Тянь-Шань: путешествие к 250 years, glasses – 1000 years, rag – 1 year, plastic истокам. bottles – 100 years, rubber packaging – 100 years, [4] Adminov M. (2008). Bostanlik district. In papier – 4 months, organic products – 1.5 year, Uzbekistan National Encyclopedia (pp. chewing gum – 50 years, cigarettes – 15 years and 866-868), Tashkent. plastic cups – 70 years. [5] Central Asian Online Travel In conclusion, ecotourism development Company. (2018). Угам-Чаткалский interrelates with improving different sectors. By Государственный Природный developing ecotourism, the state could give a Национальный Парк. Retrieved May 5, positive impulse to develop other sectors such as 2018, from https://orexca.com/rus/nature_ transport logistics, health and public infrastructure, tyan-shan.shtml social aspects etc. Uzbekistan is aimed at the [6] Global Species. (2018). Schizothorax development of all kinds of the tourist services (Minnow). Retrieved May 8, 2018, market in order to further transform tourism into from https://www.globalspecies.org/ the competitive sector of the national economy. ntaxa/2019429 With the development of ecotourism, visitors [7] International Solid Waste Association. enhance their ecological education and lead a (2016). Waste Management Outlook for healthy lifestyle. Furthermore, ecotourism creates Mountain Regions: Sources and Solutions. employment and extra capital flow in state budget. [8] Tourist Information Center Nitra. (2018). In the end, it also contributes to increasing people’s Nature. Retrieved May 10, 2018, from income and living conditions of the local people. https://www.nitra.eu/www/content/nisys/ nature/0/350 REFERENCES [9] Uzbekistan National News Agency. [1] Кусков, А. С., & Джаладян, Ю. А. (2014). I.Karimov’s Keynote Speech at (2008). Основы туризма: учебник. М.: the Opening Ceremony of the UNWTO КНОРУС, 400, 2. Executive Council’s 99th Session. [2] Худаяров, А. А., & Пирматов, Х. Р. (2014). Retrieved from http://uza.uz/en/tourism/ Воздействие туризма на национальную president-islam-karimov-s-keynote- экономику Индонезии. В сборнике speech-at-the-opening-cere конференций НИЦ Социосфера (No. 39, pp. 262-265). Vedecko vydavatelske centrum Sociosfera-CZ sro. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 111

Using choice modeling to assess grassland management policy options in Mongolia: Ulaanbaatar Residents response1

Jeff Bennett2, Lkhagvadorj Dorjburegdaa3, Duinkherjav Bukhbat, Enkh-Orchlon Lkhagvadorj4, Colin Brown5

Abstract This paper aims to identify how the Ulaanbaatar residents who are affected by certain grassland policy changes would respond using choice modelling technique.

Background livestock numbers and reduced mobility has Mongolia is a country heavily dependent on resulted in overgrazing of the grasslands especially livestock breeding with ca 66 million livestock in the areas near cities and villages (Okayasu et al. heads and a population of ca 3 million (NSO 2007; Wesche et al. 2010). dataset). The transition to market economy from The findings of this paper could be a good socialist regime in 1991 led herders to increase their guidance for the policy makers as there have animals for higher income. In 10 years, the number been no similar research done in Mongolia. The of herders has tripled. However the increase of the objective of this current study is to determine the number of livestock was not continuous. Due to herders’ preference towards different grassland harsh winters (dzud) livestock were dying out in management strategies. huge numbers. (Begzsuren et al. 2004; Tachiiri et This paper investigated the changes in the al. 2008). Many authors are claiming that frequency following policy outcomes: of the dzud has been increasing since the late 1. Grassland quality twenty and early twenty first century. (Fernández- 2. Herder culture Giménez et al. 2012). Even the increased number 3. Environmental problems of dzud and drought years has affected in decrease 4. Meat safety of the herders, Suzuki (2013) found that economic 5. Payment alternatives played a huge role such as boom in mining and trade industry. The findings of this paper could be a good Even with many goats were duying to dzud guidance for the policy makers as there have been the number of goats increased almost 4 times in no similar research done in Mongolia. 20 years since 1990. This increase is mainly due The objective of this current study is to to herders’ preference of the livestock. According determine behavior of residents of Ulaanbaatar to National Statistic Office herders has increased city who are affected by policy changes towards the number of the goats sharply at first and recently different grassland management strategy. This many herders are increasing the number of sheep paper is structured as follows: methodology of as well. This trend has affected the total number of the technique used in the study is discusses briefly livestock heavily. Many authors claim that increased followed with the result and the conclusions.

1This study is a part of a Mongolia-China-Australia collaborative project fully funded by ACIAR. I acknowledge the help of all who took part and thank ACIAR for their funding. 2 Professor, Crawford School of Public policy, Australian National University, 3 Department of Economics, School of Business and Economics, Mongolian University of Life Sciences, 4 PhD Candidate, Crawford School of Public policy, Australian National University, 5 Professor, School of Agriculture and Food Sciences, Queensland University, 112 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

METHODOLOGY The main survey was done in 2018 and 450 Choice experiments were first introduced due residents were randomly chosen and interviewed. to limitations in using conjoint analysis in studying The respondents were approached by knocking transport and telecommunication choices. (Louviere on doors where building blocks were chosen for 1981a; Louviere et al 1982.) The technique has convenience. Another approach was to ask for since then been improved and applied to different participation at public places such as shopping studies of choice in different settings. One of the malls, schools and hospitals. One of the hardships main channels the method is used is in evaluating were due to response rates. When knocking on doors non market values of environmental resources. the success rate was only 5%. When we approached In our study choice modelling (CM) technique people in the public place the success rate was 30%. has been applied to environmental aspects of the grasslands of Mongolia. RESULTS Choice experiment is a stated preference The socio-economic characteristics of the technique used to assess people’s preferences respondents are shown in Table 1: for different choice alternatives or different sets. Choice modelling uses a survey to gather data. Table 1. Characteristics of the sample herders The survey consists of different choice sets which Characteristics Value present different levels of attributes which indicate Average household income 1,116,787 possible future outcomes of a policy change. Average age 33.2 In Bennett and Blamey (2001) choice Female respondent % 70% experiments are defined to have the following Average number of livestock per elements: a set of attributes, which are valued by 52 respondent the respondents; a set of levels for these attributes, which include the status quo or the current level of The results of the conditional logit model is the attributes; a set of fixed choice options, which presented in the table below. The model consists of will present different management strategies for the choice as the dependent variable and attributes the given resource and the respondents or the set as the explanatory variables indicate that the of subjects who would choose a policy alternative attributes of environmental problems which dust given the different attributes and levels. storm days are used as proxy, meat quality which This study has been done among residents is the value of probability of buying infected meat of Ulaanbaatar, the capital city of Mongolia. and payment, which is a lump sum amount to be Ulaanbaatar is divided into 9 districts, of which added to the electricity bill were estimated to have 6 were included in our population, with 3 left significant effects on the choices of residents. out as being located outside of the city. The 6 The culture variable which is the percentage districts are Bayanzurkh, Bayangol, Han-Uul, of herders in total population had a positive effect Songinokhairkhan, Chingeltei and Sukhbaatar. on the choice, however the estimate is statistically Stratified and random sampling technique was used insignificant with p value of 0.97. in defining the 10 sub districts to ensure both the The environmental problem, meat quality and inclusion of apartment housed districts and ger payment all had negative signs of the coefficient housed districts. which is in line with our expectation. Initial steps of the survey included focus The grassland quality variable has a negative group interviews and meeting with officials to sign which is contrary to expectation, however the define the aspects of grassland that had impact on coefficient is statistically insignificant with p value city residents. The focus group interviews gave of 0.73. important insight to the Ulaanbaatar population. A The respondents of the questionnaire favored pilot study was done to improve the questionnaire lower number of dusty days, lower probability of and many trials and correction were done in the buying infected meat and lower payment for the process. grassland and the variables did have impact on their choices. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 113

Table 2. Logit model results

A set of questions to test for the validity of 2001. the responses. The following is the result of some 3. Dagvadorj, D., Natsagdorj, L., Dorjpurev, of the questions. Although most of the residents J., and Namkhainyam, B. (2009). care about the environment and believe it is their Mongolian Assessment Report on Climate responsibility, they are not willing to pay their own Change 2009. Ministry of Environment, money for it as trust in the government is low. 25% Nature and Tourism, Ulan Bator of the residents own livestock in the countryside, 4. Dulamsuren, C., Hauck, M., and therefore many people would benefit directly from Leuschner, C. (2010b). Recent Drought the policy. Stress Leads to Growth Reductions in Questions Percentile Larix sibirica in the Western Khentey, Mongolia. Global Change Biology 16: Better grassland condition improve 57% 3024–3035. Ulaanbaatar environment Government would spend my money 5. Dulamsuren, C., Hauck, M., Khishigjargal, 27% properly M., Leuschner, H. H., and Leuschner, Wants to spend my money for the city`s C. (2010a). Diverging Climate Trends 21% environment in Mongolian Taiga Forests Influence Care about the environment quality of 72% Growth and Regeneration of Larix sibirica. the city Oecologia 163: 1091–1102. My responsibility to improve the city`s 76% 6. Fernández-Giménez, M., Batjav, B., and environment Table 3. Proofing questions responses Baival, B. (2012). Lessons from the Dzud: Adaptation and Resilience in Mongolian REFERENCES Pastoral Socio-Ecological Systems. World 1. Begzsuren, S., Ellis, J. E., Ojima, D. S., Bank, Washington DC. Coughenour, M. B., and Chuluun, T. 7. Jamsranjav, C. (2009). Sustainable (2004). Livestock Responses to Droughts Rangeland Management in Mongolia: The and Severe Winter Weather in the Gobi Role of Herder Community Institutions. Three Beauty National Park, Mongolia. Land Restoration Training Programme, Journal of Arid Environments 59: 785- Reykjavik. 796. 8. Lecraw, D. J., Eddleston, P., and McMahon, 2. Bennett, Jeff, and Russell Blamey. A. (2005). A Value Chain Analysis of the The Choice Modelling Approach to Mongolian Cashmere Industry. USAID Environmental Valuation. Edward Elgar, Economic Policy Reform Competitiveness Project, Ulan Bator. 114 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

9. Lkhagvadorj, D., Hauck, M., Dulamsuren, in Northern Mongolia. Forest Ecology and C., and Tsogtbaatar, J. (2013). Pastoral Management 233: 36 - 44 Nomadism in the Forest-Steppe of the 13. Suzuki, Y. (2013). Conflict between Mongolian Altai Under a Changing mining development and nomadism in Economy and a Warming Climate. Journal Mongolia. In Yamamura, N., Fujita, N., of Arid Environments 88: 82-89 and Maekawa, A. (eds.), The Mongolian 10. Nandintsetseg, B., Greene, J. S., and Ecosystem Network: Environmental Goulden, C. E. (2007). Trends in Extreme Issues under Climate and Social Changes. Daily Precipitation and Temperature Near Springer, Tokyo, pp. 269–294 Lake Hövsgöl, Mongolia. International 14. Tachiiri, K., Shinoda, M., Klinkenberg, Journal of Climatology 27: 341–347. B., and Morinaga, Y. (2008). Assessing 11. Okayasu, T., Muto, M., Jamsran, U., Mongolian Snow Disaster Risk using and Takeuchi, K. (2007). Spatially Livestock and Satellite Data. Journal of Heterogeneous Impacts on Rangeland Arid Environments 72: 2251–2263. after Social System Change in Mongolia. 15. Wesche, K., Ronnenberg, K., Retzer, Land Degradation and Development 18: V., and Miehe, G. (2010). Effects of 555–566. Large Herbivore Exclusion on Southern 12. Sankey, T. T., Montagne, C., Graumlich, Mongolian Desert Steppes. Acta L., Lawrence, R., and Nielsen, J. (2006). Oecologica 36: 234–241. Lower Forest-Grassland Ecotones and 20th Century Livestock Herbivory Effects SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 115

THE ROLE OF FINANCIAL STABILITY IN THE STATE REGULATION OF MONETARY PROCESSES

Bayarsaikhan Zolzaya Postgraduate student, the department of Financial Markets And Banks, Financial University under the Government of the Russian Federation

Peter Kovacs Professor, University of Szeged, Hungary, [email protected]

Purevsuren Munkhtuya PhD, Head of the department of “Economic statistics and mathematical modeling” Mongolian University of Life Sciences

Abstract This paper focuses on the role of financial stability in the state regulation of monetary processes in a modern economy. There were shown the role of financial stability by cross-country, to show the dependence of the role and the economic development of countries. It is also an attempt to develop a function of monetary policy targets taking into account the financial stability. The results allow us to suggest a new monetary policy function, which takes into account not only GDP, inflation, and exchange rate, but also financial stability, one of the most considering issues in nowadays economy.

INTRODUCTION "financial stability" was not widely used. However, At the present stage of development of despite the fact that today this term is not only social and economic relations, economists, both widely used, but also used to reflect one of the main practitioners and theoreticians, in monetary goals of the monetary policy of some countries, regulation take into account not only money, there is still no generally accepted definition of credit, and exchange rate issues, but also financial this concept. Nevertheless, in our opinion the most stability. Despite the fact that financial stability was accurate and complete interpretation of this concept considered in regulation of monetary processes was proposed by G.J. Schinasi: "Financial stability by theoreticians in the last century, only the last is a situation in which the financial system is able to financial and economic crisis and the subsequent perform its three key functions simultaneously. First, recession drew the attention of most economists to the financial system efficiently and uninterruptedly this issue. distributes resources from savers to investors and Nowadays economists pay special attention to the distribution of economic resources in general. such economic schools as the new synthesis, new Second, the possible financial risks are estimated monetarism, post-Keynesianism and the Austrian fairly accurately and continue to be relatively well economic school, among the existing. It should be regulated. Third, the financial system is in such noted that if post-Keynesianism and the Austrian a state that it can calmly, if not smoothly, absorb economic school have been formed for a long time, financial and real economic surprises and shocks " the new synthesis, that dominated the monetary [1]. theory from the 90's of the XX century, after the Analysis of the literature shows that the crisis of 2007 is updated, including questions financial system is understood as the complex of financial stability in its theory, and anew of three elements. First of all, these are financial monetarism is only having been formed on the basis institutions, which are banks, insurance companies, of monetarist doctrines. A distinctive characteristic institutional investors, etc., which direct funds of all these schools is that they consider in their from those who want to invest to those who want theories finance, financial stability. to borrow. Also, as the elements of this system are Before the Bank of England published the considered money, stock and other markets, where Financial Stability Review in 1996, the term the interests of creditors and borrowers intersect. In 116 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 addition, the financial system includes the financial policy was conditioned by the experience of the infrastructure of the market, i.e. payment systems, global financial and economic crisis. According security systems of settlements, etc., through which to our research, the monetary authorities of all the money and financial assets pass between sellers and central banks of the advanced economies, as well buyers. The development of the economy in modern as the BRICS countries, 83.3% of export-oriented conditions requires stable uninterrupted operation countries and 75% of low-income countries have of all three elements of the financial system that financial stability regulators (according to the have a positive impact on economic activity. classification of the countries of the International In recent years, "the achievement and Monetary Fund). This suggests that with the maintenance of financial stability" include many economic development of the country more actively monetary authorities of the world in their monetary take financial stability as one of the main issues in policy goals. This change in views on monetary the regulation of monetary processes.

Financial stability authorities across countries 40 35 30 25 20 15 Countries in the group 10 5 Countries with financial 0 authorities

However, this does not mean that the financial sphere [4]. Thus, the economist shows However, this does not mean that the monetary Thus, the economist shows his approach authoritiesmonetary didauthorities not know did about not knowthe key about role thein the tohis modernapproach monetary to modern policy monetary - the policy stability - the of the economykey role played in the byeconomy financial played stability. by financial According pricestability level of the is mostprice important,level is most and important, the remaining to stability.the former According chairman to of the the former US Federal chairman Reserve, of tasksand the are remaining of secondary tasks importance.are of secondary Meanwhile, B.Sh. Bernanke, the whole point is that before the as practice shows, a low and stable level of prices the US Federal Reserve, B.Sh. Bernanke, the importance. Meanwhile, as practice shows, a crisis there was not enough "macroprudential or does not provide a guarantee of financial stability, system-widewhole point view" is that [2]. before the crisis there was andlow and consequently, stable level of an prices efficient does not functioningprovide of notProfessor enough "macroprudential of Columbia or system-wide University thea guarantee economy. of Therefore, financial in modernstability, conditions,and Mishkin believes that the financial sector and scientists and economists are actively discussing view" [2]. consequently, an efficient functioning of the macroeconomics, as well as monetary policy and how to ensure financial stability and price level financialProfessor stability of are Columbia closely interrelated,University while stabilityeconomy. at Therefore,the same time. in modern conditions, notesMishkin that using believes tools that of monetarythe financial policy sector is difficult and scientistsIt should and be economists noted that thereare areactively also other to macroeconomics,achieve such a goal as aswell financial as monetary stability policy [3]. views,discussing according how to ensureto which financial monetary stability and andfinancial C Benoit, a member of the ECB's executive policies need to be considered separately. Supporters and financial stability are closely interrelated, price level stability at the same time. board, ranks the goals of monetary policy as of this approach argue their position by the fact follows:while notes the mainthat using goal tools of monetary of monetary policy policy is to that monetaryIt should and be financial noted that policies there arehave also different ensureis difficult the stability to achieve of the such price a levelgoal asin thefinancial medium goalsother views,and different according tools to whichto achieve monetary them. and One of term, and short-term goals are to maintain stability the economists who adhere to this approach is L. stability [3]. C Benoit, a member of the ECB's financial policies need to be considered of economic growth and the financial sphere [4]. Svensson. According to the scientist, the main goal executive board, ranks the goals of monetary ofseparately. the monetary Supporters policy of should this approach be flexible argue inflation policy as follows: the main goal of monetary their position by the fact that monetary and policy is to ensure the stability of the price level financial policies have different goals and in the medium term, and short-term goals are to different tools to achieve them. One of the maintain stability of economic growth and the economists who adhere to this approach is L. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 117 targeting, in which all information about financial closer the indicator to 1, the greater the financial conditions related to forecasting inflation must be instability. Therefore, if to insert this indicator taken into account [5]. into the equation for the reaction of real short-term There are also views on the relationship interest rates in an open economy, then the greater between monetary policy and the financial system, the instability of the financial market, the greater according to which the degree of their relationship the interest rate will be. Thus such a monetary depends on the level of development of the policy will increase economic growth by reducing latter. Supporters of this approach argue that the inflation. developed financial system, the more it is able to As a result of the expansion of the Ball absorb financial stress, because and households and equation (initially the Taylor equation), we obtain firms in today's conditions can replace banks with the equation for the reaction of real short-term financial markets, thus benefiting from the so-called interest rates under current conditions (5): paired engines of the financial system. As a result of his analysis, R.J. Rajan and L. Zingales [6]. (5)

METHODOLOGY где – the significance of the financial However economists agree on importance of stability indicator the financial stability, there is still no consensus on whether to include financial stability openin economy, monetary then the grRESULTSeater the instability increase economic growth by reducing policy or it should be considered in parallelof the financial with market, theThe greater application the interest of thisinflation. rule on the example it, and Analysis of the possibility of determiningrate will be. Thus ofsuch Mongolia'sa monetary policy monetary will policy shows that the the reaction of real short-term interest rates, takingAs a result keyof the policyexpansion rate of the of Ball the equation central (initially bank the ofTaylor Mongolia equation), weis obtain the into account the factor of financial stabilityequation and/or for the reactionoverstated, of real short-term which interest may rate bes under the currentreason conditions for the (5): delay instability gives the following results. The original in economic growth. The analysis shows that (5) ∗ ∗ model is as follows: где – the�� significance��inclusion��� �� of) of��the �financialthe�� �� financial) stability� ��� � indicator�� stability���)�� ������ indicator) raises if so, by what means and methods. In Results our� the interest rate, however, the real established rate opinion, the solution of this question may beThe the application is overestimated of this rule on eventhe in however, this case. the Suchreal aestablished policy rate is expansion of the Ball’s rule [7]. example of Mongolia'sof expensivemonetary policy money shows withoverestimated low inflation even in this ratescase. Such of a policy that the key policy rate of the central bank of of expensive money with low inflation rates of 1-2% may become a deterrent to economic growth. Mongolia is overstated, which may be the 1-2% may become a deterrent to economic (3) Exceptions are 2009 and 2014, when there was a reason for the delay in economic growth. The growth. Exceptions are 2009 and 2014, when high difference in nominal and real GDP growth, analysis shows that inclusion of the financial there was a high difference in nominal and real где , – the significance of thestability indicator indicator andraises high the inflationinterest rate, at 9%. GDP growth, and high inflation at 9%.

– nominal short term policy rate at the time t Bank of Mongolia's Policy rates, % 16 – inflation rate at the time t 14 - targeted inflation rate at the time t 12 Policy rate %, calculated by the Ball – real growth of GDP 10 rule - nominal growth rate of GDP 8 Policy rate %, calculated by the – real effective exchange rate at the time t 6 extended Ball rule – real effective exchange rate in the 4 BoM's policy rate % previous period 2 0 To derive a model of monetary policy, where 2009 2014 2015 2016 2017 the financial state will be taken into account, it 1 Authors’ calculations on the basis of the BoM’s data [8] is necessary to introduce a variable of financial Authors’ calculations on the basis of the BoM’s data [8] stability. As such variable, we take the financial instability index (FSM), which we obtained by It should be noted that there is a trend towards finding the overall measure of financial instability a lowering of the interest rate of the central bank, based on the methodology of the Central Bank which is a positive factor in the state regulation of of Mongolia. According to this methodology,As the indicator theof financial stabilitymonetary of the Bank of Mongolia processes. is calculated for 2009, 2014-2017.Nevertheless, Our indicator is also calcul itated is for thesestill periods. very 118 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 much overestimated, as indicated by the analysis. [3] F. S. Mishkin, “Monetary policy strategy: CONCLUSION lessons from the crisis,” NBER working The function we obtained reflects the reaction paper, p. 62, February 2011. of real short-term interest rates as response to [4] B. C., “ecb.europa.eu,” 17 May 2013. changes in inflation, GDP, exchange rate and [Online]. Available: http://www.ecb. financial stability or instability indicators. However, europa.eu/press/key/date2013/html/ it should be noted, as the Taylor's rule does not sp130517.en.html. [Accessed 18 April reflect unconventional methods of monetary policy, 2018]. they are also not taken into account in the extended [5] S. L., “Monetary policy after the financial equation. In addition, since the monetary authorities crisis,” in International Journal of Central do not have instruments to directly affect financial Banking, Tokyo, 2010. stability or instability, and the interest rate is not [6] Z. L. Rajan R.G., “The great reversals: the the mean to do it, it becomes necessary to carry politics of financial development in the out a comprehensive analysis and regulation of the twentieth century,” Journal of Financial financial system as a whole, i.e. macroprudential Economics, vol. Vol. 69, pp. 5-50, 2003. regulation. [7] B. L., “Policy rules for open economies,” NBER working paper No. 6760, p. 30, REFERENECES October 1998. [1] G. J. Schinasi, Safeguarding financial [8] “mongolbank.mn,” [Online]. Available: stability: theory and practice, Washington https://www.mongolbank.mn/eng/default. D.C.: International Monetary Fund, 2005, aspx. p. 82. [9] S. T. Jakubik P., “Measuring Financial [2] B. B.S., “federalreserve.gov,” 22 August (In)Stability in Emerging Europe: A 2008. [Online]. Available: Bernanke New Index-Based Approach,” Financial B.S. Reducing Systemic Risk / Speech Stability Report (Journal of Austrian at thehttp://www.federalreserve.gov/ Central Bank), vol. Vol. 25, pp. 102-118 newsevents/speech/bernanke20080822a. June 2013. htm. [Accessed 18 April 2018]. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 119

TO DISSEMINATE SUITABLE BOOK KEEPING SYSTEM FOR MONGOLIAN WHEAT FAMILY FARMS ABOUT THEIRS ACTIVITY ANALYSES

MS Oyunchimeg SAMDANKHUU1 Dr. Odonchimeg BATJARGAL2 Dr. Hideo Furutsuka 3 Amarsanaa ENKHSAIHAN4

1Senior lecturer of Department of Accounting and Analysis, School of Economics and Business, Mongolian University of Life Sciences, Mongolia Address: Ulaanbaatar -17024, MONGOLIA Khan-Uul district, 11 khoroo, Zaisan, Building School of Economics and business , Mongolian University of Life Sciences, Tel: 976-99088077, e-mail: [email protected] 2 Head of Department of Accounting and Analysis, School of Economics and Business, Mongolian University of Life Sciences, Mongolia Address: Ulaanbaatar -17024, MONGOLIA Khan-Uul district, 11 khoroo, Zaisan, Building School of Economics and business , Mongolian University of Life Sciences, Tel: 976-88114813, e-mail: [email protected] 3 Vice president of Tottori University Director of Admissions Center, Tottori University, JAPAN, Address: Tottori University 4-101 Minami, Koyama Chou, Tottori city, Tottori 680-8550, Japan Tel: +81-857-31-5661, fax +81-857- 31-5569, e-mail: [email protected] 4Graduate student of Tottori University JAPAN, Address: Tottori University 4-101 Minami, Koyama Chou, Tottori city, Tottori 680-8550, Japan Tel: +81-80 8233 7730, [email protected]

Abstract Demand for domestic wheat cannot be satisfied in Mongolia. For this reason wheat imports are increasing. Under such circumstances it is important to grasp the actual condition of wheat farmers. However, there is no agricultural bookkeeping to grasp the actual condition of farmer economy and agricultural management regarding family farm. Also, few studies on agricultural book keeping. For this purpose, this study aims to examine bookkeeping format and bookkeeping style suitable for Mongolian wheat family farm. Furthermore, we will examine how to compile booking results and management analysis method. We will to disseminate agricultural bookkeeping practices of wheat family farm and carry out family economic analysis based on the results of book entry to increase farms income.

Key word: Agricultural book keeping of Mongolia, self-accounting book keeping system for wheat family farm, member structure of family farm, total income, agricultural income, crop income, livestock income, other income, family expense

INTRODUCTION support the agricultural sector. As a result, the crop Mongolia has been deciduous from socialist sector has gradually recovered. society to the democratic society in the early 1990's. The main food products of Mongolian are In this regard, agricultural enterprises moved from wheat. So wheat production has increased since public to private ownerships’ company and family the current wheat production and the transition to a farms. In the early years of the transition to the market economy. In the 2016, planted 355 thousand market economy, there was no policy toward the hectares, and had 460 thousand tons of harvest. government to agricultural enterprises, companies But the supply of wheat is not enough to provide and family farms. As a result, crop production Mongolia's domestic demand and need more 320 declined. In 2008, the Mongolian government thousand tons of wheat, which is likely to increase implemented the "Atar-3"campaign program to wheat imports. In other words, wheat imports in 120 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

2011 were 7300 tonnes, it up to 21000 tonnes in CONSIDERATION (THINGS THAT 2015. In such circumstances, need to promote ARE INTERESTING OR CLARIFIED) wheat production - the main foodstuffs and need (1) Current situation of agricultural accounting to increase the ability of meet the domestic food in Mongolia, it is based on questionnaire survey: needs. For this purpose it is important to first First, the results of the questionnaire related determine the situation of wheat farmers. However, to the transactions of wheat farmers and the type of there are no agricultural accounting to clarify the book keeping they hold. The survey was conducted economic situation of the enterprises and farmers in 2015, with 29 wheat farmers, which resulted in and the factual situation of agricultural production. the following results. In this way, the wheat farmers: In addition, there is little research on agricultural Most of farmers doing more business, because accounting. So, this time, Mongolian University of it is not possible to live with wheat earnings, Life sciences and the Tottori University of Japan ①Due to the large number of transactions made are collaborating on the joint research project “To by the loan, so receivables are often generated and disseminate suitable accounting for Mongolian not② collecting receivable within 1 year, Some wheat family farms and theirs activity analyses”. farmers have long and short-term loans and they not This time we are introducing some of the details paid the loan by wheat income, There ③are many that have been clarified as a result of our joint farmers who do not know about book keeping, and research project. knowledgeable farmers are aware,④ they know about just of their income and expenditure, In addition there are many transactions made by the loan. THE PURPOSE OF THE JOINT Second, about the selection of⑤ agricultural RESEARCH PROJECT AND THE book keeping system. The above 5 items have RESEARCH METHOD been identified as a result of the survey , First, the purpose of the joint research and , wheat farmers need " Self-accounting project. Purpose of the joint research project is book keeping system of family farms". ① To ③ be to disseminate the self accounting book keeping published,④ the account has the following features: system for wheat family farms in the Mongolian First, It is intended to cover the entire business wheat farms (hereafter referred to as wheat farmers). of agricultural and non-agricultural transactions. Furthermore, it is intended to increase wheat Second, Classified cash and non-cash transactions, production and income of farmers by analyzing so no need book keeping good knowledge. Third, farmer economics based on the accounting results. it is possible to control the cash flows that flow in Currently, the 31 farmers of Tseel soum of Tuv the debt repayment and all the farmer's activities. aimag is accounting "Self accounting book keeping As a result of the joint research project, the "Self system for wheat family farms". accounting book keeping system for wheat family farms " of the wheat family farms – book keeping SECOND, RESEARCH METHOD. for self-monitoring were developed. • To clarify the type of transaction and Third, about Self accounting book keeping accounting of wheat farmers. Select the system for wheat family farms repair. The appropriate accounting form. questionnaire was modified to self-review based • To develop the selected agricultural book on and above 5 results that resulted in the keeping form. findings. In other words, there is a lot of credit • To encourage the book keeping. transactions② ⑤ of purchasing and selling, therefore, • To account the results of the farmer's it is shown in Figure 1, adding a new column for economic performance, analyze farming cash and inventory books. As mentioned above, outcomes and present the results to the however, as and , as wheat is a key sector farmers. for wheat farmers, it is necessary to improve farmer performance ② by sector⑤ analysis and correctly calculating wheat cost. Thus, “Wheat” column was added to the “Profit impact expense" column. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 121

Picture 1. Correction on cash and inventory Cash and inventory Income Expense Transaction Profit Asset Profit Asset Brief Brief Household Total impact impact impact impact meanings meanings expense Income Income Expense expense Beginning of MNT ₮ MNT ₮ MNT ₮ MNT ₮ MNT ₮ 3,000 account Sold 10kg wheat on Wheat 5,000 Receivable 5,000 credit loan Purchased 20 kg Payable 2,000 fertilizer 2,000 fertilizer on credit. Received pensioner. Pensioner 7,000 10,000 Ending of account 12,000 2,000 5,000 5,000 10,000

Cash and inventory Revenue Expense Profit Asset impact Profit impact Asset impact impact revenue Expense expense revenue Purchase Other on credit Total Transac tion Transac Brief meanings Brief meanings Household expense Other Other revenue Other revenue Other Other expenses Other Credit purchase Credit Received payable Revenue on credit Receive receivable Collected receivable Collected receivable Other expenses Other Related to wheat to Related wheat to Related Beginning ₮ ₮ ₮ ₮ ₮ ₮ ₮ ₮ ₮ ₮ ₮ ₮ ₮ 3,000 of account Sold 10kg Recei- wheat on Wheat 5,000 5,000 vable debt Purchased 20 kg Ferti- Payable 2,000 2,000 fertilizer on lizer credit. Received Pen Pension 7,000 10,000 pension. sion Ending of 5,000 7,000 2,000 2,000 5,000 10,000 account 1.Kikuchi Taiji (1986) "Agricultural financial accounting" 2. Based on the 2015 years wheat farmers survey.

3. Date, amount, goods used at households are not included. (2) Results of analysis. From December 2016 to December 2017, 3 wheat farmers was recorded Fourth, to promote and inform the "Self their accounting. The results are as follows: accounting book keeping system for family farm”. 1）Brief introduction of the farmers. As shown Since 2017, the training was held at the Mongolian in Table 1, “A” farms household head is engaged University of Life Sciences. In March 2018, the in wheat cultivation and also shifting to Erdenet seminar was organized in Tseel soum of Tuv aimag. Limited company which is located in Erdenet sity, Currently, this farmers accounting is being held by he earns double income. As shown in Figure 2, 31 farms, for one year. farm located in Selenge soum, Bulgan aimag, 430 122 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 km from Ulaanbaatar. The wife helps her farming children, the head of the household alone activities and does not have specific business. carries the business. “C” farm has a double “C” farm is engaged in agricultural income. The farm operates in Orkhon soum activities. This farm is located in Tushig soum of Bulgan aimag, approximately 410 km from of Selenge aimag, about 510 km from UB. Ulaanbaatar. The head of the household is The wife is unemployed and carries for their engaged in farming with his wife, his wife is

Table 1. The structure of the family farms Unit: age, person B farm C farm Occupa Occupa Member Sex Age Member Sex Age Member Sex Age Occupation tion tion Agricul Head of Head of Agricul Head of m 58 ture and m 37 m 56 Agriculture household household ture household company Agricul Unemp State Wife f 57 Wife f 35 Wife f 57 ture loyed Wemployee Secon Own Child 1 f 22 student Child 1 m 11 dary Child 1 m 23 business school Secon Secon Child 2 f 17 dary Child 2 f 7 dary Child 2 f 22 student school school Kinder 4 garten Kinder Child 3 m 2 garten Number of family 4 6 4 members Resource: Based on book keeping of farms

Resource: Based on book keeping of farms Picture 2. The map of Mongolian zone Picture 2. The map of Mongolian zone

A farm B farm

C farm

Central

West Ulaanbaatar East

Khangai

Зураг 2. Монголын бүсийнGovi зураг Эх материал: Монголын ХХААХҮ яамны мэдээлэл

Resource: Ministry of Food Agriculture and Light Industry Resource: Ministry of Food Agriculture and Light Industry (3) Agricultural activities by crop income. The total income of farms As shown in Table 2, “A” farm is about 60% of wheat income. workers are 2 person and also 9 half-time The “C” farm has 2 full time workers employed. Total area of crop workers and has more 2 half time workers. cultivation is 100 hectares and sowing The total rotation area is around 120 wheat in 94 hectare. For a “C” farm, a hectares and 70 hectares of them planted household worker is 1, and has 6 half-time wheat. Approximately 32% of total income workers. The total area of crop cultivation and 70% of agricultural income are wheat is 200 hectare and wheat in 100 hectares, income. In addition, farm has a livestock, 50 hectares of vegetable oil and 50 livestock income accounted about 11% of hectares. “A” farm is a crop-based farm, so total income and about 25% of agricultural the total income of the farm is generated income.

Table 2. Structure of agricultural activity unit: person, hectare, thousand MNT �, % Man power Crop cultivation area Sales revenue Total Struc- Full Wheat Family Part inco Other Farmers ture of time Total Oil Fal mem time Wheat me inco income wor area plants low To ber workers of % me kers tal farm A farm One 4 2 9 100 94 ― 6 - - 60 - B farm Double 6 1 6 200 100 50 50 - - 60 - C farm One 4 2 2 120 70 ― 50 - - 48 - Resource: Based on accounting of farmers Note: 1) The "%" of the total income of wheat represents the share of total wheat in total household

5

SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 123 also works as a specialist in the agricultural wheat in 100 hectares, 50 hectares of vegetable oil sector of the Bulgan aimag. and 50 hectares. “A” farm is a crop-based farm, so the total income of the farm is generated by crop (3) AGRICULTURAL ACTIVITIES income. The total income of farms is about 60% of As shown in Table 2, “A” farm workers are wheat income. 2 person and also 9 half-time workers employed. The “C” farm has 2 full time workers and has Total area of crop cultivation is 100 hectares and more 2 half time workers. The total rotation area sowing wheat in 94 hectare. For a “C” farm, a is around 120 hectares and 70 hectares of them household worker is 1, and has 6 half-time workers. planted wheat. Approximately 32% of total income The total area of crop cultivation is 200 hectare and and 70% of agricultural income are wheat income.

Table 2. Structure of agricultural activity unit: person, hectare, thousand MNT ₮, % Man power Crop cultivation area Sales revenue Structure Full Part Total Wheat Farmers Family Total Oil Fal Other of income time wor time Wheat income member area plants low To income kers workers of farm % tal A farm One 4 2 9 100 94 - 6 - - 60 -

B farm Double 6 1 6 200 100 50 50 - - 60 -

C farm One 4 2 2 120 70 - 50 - - 48 - Resource: Based on accounting of farmers Note: 1) The "%" of the total income of wheat represents the share of total wheat in total household income 2) "Double" means they have other income except agriculture, for example wage 3) "One" means they have only agricultural business

In addition, farm has a livestock, livestock income its family consumption and the net profit of the accounted about 11% of total income and about farm is reflected in the increase in cash and cash 25% of agricultural income. equivalents.

THE RESULTS OF THE ANALYSIS OF CROP PRODUCTION AGRICULTURAL ECONOMICS’ AND THE WHEAT SECTOR ANALYSIS. First, the analysis of agricultural and crop An “A” farm did not accounted family income production. An “A” farm is planted only wheat, so and expenditure, so did not analyze, farms ” D” and analyzed farm “B” and “C”. As shown in Table 4, “C” are accounted, so analyzed them. the wage of per day and return of investment family “В” farm is doing business only in crop exceeded than per day’s wage of this region (20,000 production. “B” is capable of fully supporting MNT ₮/ day) and long term savings bank interest family consumption expenditure by farm income. rate (3.6 percent). So, these two farms' activities are Table 3 shows that the main activity is the wheat high productivity and the good return on capital. sector, calculating for 66% of the crop income to Second, the analysis of the wheat sector. The total income. The net profit of the farm increases results of the analyze wheat sector analysis are as the farm's assets in cash and cash equivalents. follows: “C” farm has other income, it is about 60% The harvest of per hectare. “A” farm’s harvest of the total income, it is more than agricultural of per hectare is 372 kg, “C” farm’s harvest is 1720 income. But the wheat income is 75% of the total kg, C -571 kg. “A” and “C” farms explain that the income of agriculture, so wheat is the main sector reduction in harvest has been lost in drought-related of the farm. The net income of wheat is fully met crops. In view of the geographical location of the 124 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

“C” farm, it is thought that the impact of drought was low due to the northernmost part of Mongolia and the forested area.

Table 3. Farm's activities analysis Unit: thousand MNT ₮, % B farm C farm Accounts Comparable Comparable Total Total amount amount Farm 143,700 100 45,046 100 Agricultural 143,700 100 28,190 63 Wheat 94,500 66 28,190 63

Total income Total Other than agricultural - 0 16,856 37 Farm 90,702 100 20,981 100 Agricultural 90,702 100 19,292 92 Wheat 64,545 71 14,042 67 activities Total cost of Total Other than agricultural - 0 1,689 8 Farm 53,000 100 25,065 100 Agricultural 29,955 100 10,298 41 Wheat 29,955 100 7,638 74 Net income Other than agricultural - 0 15,267 59 Household cost 24,472 46 4,836 19 Net income of farm 28,527 54 19,229 77 Resource: Based on book keeping of farms Explanation: Proportion of family farms cost and net income is comparable amount of net income.

Wage of per day. The wage of per day Third, Calculation of wheat production cost. household worker is higher than the per days wage 1) Compared to the cost per kilograms to sales of these region (20,000 MNT ₮ / per day). This price, the 3 farms have a positive outcome, price is means that the labor cost is high. But, this figure higher than cost. This is due to the high investment is comparable to the per days wage of “B” and “C” returns and high labor productivity. 2) Calculation farms, the wheat sector’s low effective. (“C” farm's of harvest per hectare and production cost per 38.5 to 27.0 and C” farm's 12.9 to 5.0 falling down) kilograms. If fixed cost of wheat production is The return of investment. The return on high in the planting, the more obvious it is. There investment in the 3 farmer’s is higher than the long is a need to reinforce this pattern. To observe this term savings interest rate (3.6%). As a result, capital relationship, we can see from a wide range of peer- gains are high. Compared to agricultural indicators, to-peer activities, and this three farms are seen as a the return on investment in the wheat sector is equal peasant farm. to per day working household wage.

Table 4. Activity analysis Unit: thousand MNT ₮, day, tonn, kg, %, hectare, hour Agricultural activity Wheat Average of Accounts / Items Mongolia A farm B farm C farm A farm B farm C farm Total revenue 21,233 143,700 28,190 21,233 94,500 21,680 ― Total cost 15,193 90,702 19,292 15,193 64,040 14,042 ― Net revenue 6,040 52,998 8,898 6,040 30,460 7,638 ― Worked day 85 78 30 85 56 30 ― SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 125

Wage per day 17,000 15,600 6,000 17,000 11,200 6,000 ― Total owner’s equity 119,000 638,919 178,480 119,003 425,946 170,530 ― Owner’s equity profit 4,284 230,011 64,253 42,841 153,341 61,391 ― Cost of production 21,177 115,263 249,173 211,768 804,939 207,811 ― Net profit of activity 562 284,374 32,727 562 140,062 8,989 ― Amount of production 35 216 40 35 172 40 ― Present of net profit 28.4 36.9 36.5 28.4 32.2 35.2 ― Wage per day of farmers 206.6 3,845.8 1,290.9 206.6 2,701.1 499.6 ― Owners equity's 3.6 8.1 5.4 10.4 3.9 4.1 ― profitability Sales price per kg ―3) ― ― 607 549 542 500 Cost of per kg ― ― ― 605 468 514 567 Harvest of per hectare ― ― ― 0 2 1 930 Working hours of per ― ― ― 2.6 3.2 ― ― hectare Total farmland 100 200 120 94 100 70 ― Course: Based on book keeping of farms. Note: 1) Calculated 20000 MNT ₮ wage per day 2) Assumed owners equity's profitability is 3.6% 3) "―" means not calculated 4) Based on 2017 year book National Statistics office of Mongolia.

FAMILY FARMS ECONOMICS expenses. Also, the difference in family member ANALYSIS structure makes the difference between the 2 family Family farms economics’ analysis was done living standard. for “B” and “C” farms who accounted household The second, the farm “C”'s amount of money expenses. The economics’ analysis of the 2 farms used for family is higher than farm. Because this has identified two things. farm has animal husbandry and spent from livestock The first, there is a difference between the for family. That's why it is noticed that wheat farms two family members, so there is a difference in generally a little amount wheat use for household. the amount and the cost structure for each type of

Table 5. Family economics analyse Unit: thousand MNT ₮, % B farm C farm Average of Mongolia Accounts / Items Comparable Comparable Comparable Total Total Total amount amount amount Food (the Engel curve) 7,725 32 1,524.0 32 2,729 20.8 Clothes 2,530 10 121.0 3 - - Water and electricity 1,865 8 110.0 2 - - Telephone, post and P30 1,503 6 517.0 11 - - Fuel 3,627 15 435.0 9 - - Social and health insurance 665 16 185.0 4 - - Anniversary and entertainment 2,196 14 1,660.0 34 - - Tuitions fee (the Engel curve) 209 1 - - 616 4.7 Other 2,350 10 1,682.0 35 - - Household expense (total) 24,470 100 4,835.8 100 13,109 100.0 126 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Expense by cash 24,470 100 4,435.8 92.0 12,544 95.7 Goods used to household - - 400.0 8.0 565 4.3 Household cost per person 4,078 - 1,209.0 - 3,543 - Living standards 15,937 65 971.7 20.0 13,829 105.5 Relation on agricultural 24,470 100 3,026.3 63.0 - - Based on book keeping of farm Note: 1. Relation on agricultural means agricultural income's percentage of total income. 2. "―" means not calculated. 3. Comparable amount of household is the percentage of total amount of household use to household expense. 4. Comparable amount of cash is the percentage of cash expenses to household expenses.

CONCLUSIONS In the future, it joint research work of book The first, in this research work, the formulation keeping will continue and it will comparable and of transactions and account of wheat farms in help to make accurate analysis. Mongolia has been identified and the form of proper book keeping for those farms are designated REFERENCES: as "Self accounting book keeping system for wheat 1. Kikuchi Taiji (1986) “Agricultural family farm". The second, based on the findings of financial accounting” the survey, a self accounting book keeping system 2. Ministry of Food, Agriculture and Light was developed and the "Self accounting book Industry of Mongolia, “Wheat harvest and keeping system for wheat family farm" is edited. import statistics” http://mofa.gov.mn/exp/ The third, "Self accounting book keeping blog/8/69 system for wheat family farm" training has been 3. National Statistics Office of Mongolia introduced and had to farmers, and this time the “Average data of Mongolia” 2017 year results of the 3 farmer's accounting, book-keeping http://www.nso.mn/ economics’ and household analysis are presenting. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 127

CAN SOCIAL CAPITAL HELP GET LOAN? A STUDY OF RURAL POOR HOUSEHOLDS IN CHINA1

Huixian Xu2, Xu Dai3 (School of Finance, Inner Mongolia University of Finance and Economics, China) (School of Foreign Language, Inner Mongolia University, China)

Abstract: In the rural poor areas in China, many households can’t get loan from banks due to shortage of collateral. As a kind of special capital, social capital not only has the attributes of common capital but also can supplement the insufficiency of material and human capital to increase rural poor households’ income. This paper firstly analyzes the impact mechanism of social capital on the loaning behavior of rural poor households. Applying bivariate logistic regression model and Tobit model, it then examines the possible and real impact of social capital on loaning availability. It concludes that some attributes of rural poor households will have impact on the loan. Especially, the social capital has significant positive impact on loan. Keywords: social capital; loan availability; rural poor households

INTRODUCTION Borrowers’ reputation, or the social networks to Poverty reduction has been one of the primary which they belong, take the place of traditional developing goals in China. Over the past four physical or financial collateral. With regard to decades, Chinese economy has grown rapidly, and, social capital, the Asian Development Bank (ADB) as a consequence, China has achieved an outstanding claims that participating in community groups can reduction in the poor population. However, poverty be considered as the structural dimension of social is still very noticeable in rural poor areas and capital, which leads to poverty reduction in rural remains one of the biggest challenges in China. areas of the country. They emphasize that being a Can social capital help the rural poor households member of a community group can bring various get more loan and reduce poverty? What makes benefits, such as improved self-esteem and security them decide to participate in community groups? for time of emergencies (ADB, 2013). In short, the In developed economies, households generally social capital can increase the access to various obtain credit, against individual guarantees, from services, including education and health, which commercial sources that reach loan decisions on the leads to poverty reduction. basis of readily available information on borrowers’ The relationship is the most important credit risk. In most developing economies, however, feature in rural poor areas in China, especially for poor households usually do not have access to these households based on social networks. Can social guarantee mechanisms, such as non-real estate- capital of households be considered as a signal of based collateral. This situation, combined with the repayment willingness and capacity? Which one overall lack of information about these potential of social capital can impact on loan from financial borrowers’ creditworthiness, contributes to a virtual market in rural poor areas? These question needs exclusion of this group of borrowers from formal to be further studied in the theory and practice. credit markets. However, some social capital offer Based on data of rural poor areas in Inner Mongolia to these borrowers valid substitutes for individual Autonomous Region in China, this paper explores collateral and to the lenders low cost alternatives mechanisms by which social capital can facilitate or to imperfect creditworthiness information. impede rural poor households’ loan from financial

1 This work is supported by China NSF grants (71662023), Science and Technology Department of Inner Mongolia grants (2016MS0702). 2 Huixian Xu is with the School of Finance, Inner Mongolia University of Finance and Economics, China (e-mail:[email protected]) 3 Xu Dai is with the School of Foreign Language, Inner Mongolia University, China (e-mail:[email protected]) 128 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 market. It is organized as follows. Section II puts whereas cognitive social capital is internal and together a review of the literature on social capital. concerns people’s thinking (Krishna and Uphoff, Section III analyzes the impact mechanism of social 2002). Generally, it is understood that social capital capital on the loan of rural poor households. Section has a positive effect on communities. However, the IV presents the empirical study by introducing same ties that facilitate better relationship could also bivariate logistic regression model and Tobit model exclude certain people from participation (Narayan, and Section V is conclusions 1999). An individual may be selected for a task not because of his or her knowledge or professional DEFINITION capacity, but merely through the social capital of It has been one of the potential areas of research acquaintances. Solidarity networks can also be a to explore the role that social capital plays in the cause of downward spiraling mechanisms (Portes economic behavior of the people during the last and Landolt, 1996), and several studies have raised decade. James Coleman’s (1988) early study on the the issue that social capital could exclude outsiders role social capital plays in fostering human capital while strongly connecting group members (Portes, is considered by many to be a seminal work in terms 1998; Narayan, 1999;Woolcock and Narayan, 2000). of its contribution to analysis of this topic. Coleman Many studies also recognize the significance of (1988) defined social capital as “social structure social capital for the poor. For instance, Woolcock that facilitates certain actions of actors within the and Narayan (2000, p. 225) believe that the structure.” In this concept, he highlighted the roles conventional aphorism of “it’s not what you know, of mutual obligation, expectations, trustworthiness, it’s who you know” sums up the wisdom and social norms, social sanctions and the transmission significance of social capital. An availability of a of information. varied supply of social capital helps communities The World Bank defines social capital as more effectively fight poverty (Woolcock and “the institutions, relationships, and norms that Narayan, 2000). The same equivalent consequence shape the quality and quantity of a society’s social is observed when there is an absence of network ties interactions”, while the OECD (2001, p. 41) defines and non-membership as an outlining characteristic it as “networks, together with shared norms, values of being poor. Grootaert (1998, 2001) found that and understandings which facilitate cooperation social capital influences household wellbeing by within or among groups.”Although the concept reducing the probability of being poor. Grootaert et of social capital can be understood differently, al. (2003) also reports a much higher benefit from there has been a visible convergence towards a social capital investments for the poor than others definition that focuses on networks, shared norms in general. It is argued that social capital enhances and values that facilitate cooperation within and economic development by making possible among groups (Healy and Hampshire, 2002). The dealings among individuals, households and groups network is the people that we know as family, through increasing information availability and friends and neighbors in the community (Putnam, reducing costs, facilitating collective decisions and 1995). Norms are unwritten rules and values that minimizing opportunism. describe a community (Coleman, 1988). How we communicate and interact with each other as IMPACT MECHANISM OF SOCIAL neighbors, friends and acquaintances is strongly CAPITAL ON LOANING BEHAVIOR influenced by certain rules and social norms. The In rural poor areas in China, the social capital reliability of the people that one interacts with shows of households importantly affects loaning behavior one’s trust (Grootaert and Narayan, 2004). Trust because of lacking of effective collateral, cash flow can be created and developed through education and mortgage guarantee. The following will be from and exchanges with diverse people (Uslaner, the mechanism of information, trust, punishment 2004). Social capital has been categorized into and mortgage guarantee to interpret the effects of structural and cognitive social capital (Grootaert the social capital. and Bastelaer, 2002; Krishna and Uphoff, 2002). Structural social capital is external and more visible, SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 129

Information Mechanism The households with stronger connections are The capital markets for the poor particularly better able to distinguish between strategic default in rural areas in developing countries appear to be and default due to true negative personal shocks and underdeveloped. Loans from family and friends forgive the borrowers who have a genuine reason are perhaps the most common form of informal for default allowing them to continue borrowing. finance. These arrangements are characterized by uncollateralized loans that carry no or little interest, Trust Mechanism feature open-ended repayment arrangements, The social capital may consist of general trust in and have a strong focus on reciprocity. The the society as a whole, specific trust of one individual traditional local moneylender can be seen as a toward its group members, acquaintanceship among commercialized variation on this widespread type group members and the trust based on experiences of lending arrangement. Moneylenders, typically with other members related to repayment of loan. landowners or traders, are often the only source of The social behavioural rules, which are subscribed credit available to the poor in developing countries, by all other members of a community, will become especially in the rural areas in China. Their loans the best strategy for a rational, self-interested people are extended quickly and for short periods, and at to follow. Such rules are referred to as social norms interest rate levels that are high in comparison with in that they are shared among a group of people other lenders, including microfinance programs. and are sustained by the approval of others. What Because of their long-term presence in the village can make a social norm in the above sense distinct and their networks of influence over many aspects from the various other possible strategy profiles of a of the community life, moneylenders have a given scenario that may also be equilibrium profiles good knowledge of the credit-worthiness of the is that the behavior prescribed by the social norm borrowers, and can design personalized interest will have arisen from cultural values, conventions, rate structures accordingly. The local moneylenders or the historical circumstances that are particular have one important advantage over the formal to the community. So members in the groups trust [lending] institutions: they have more detailed each other and cooperate easily. If co-operative knowledge of the borrowers. They therefore can strategy profiles exist that are more efficient than separate out high-risk and low-risk borrowers and the equilibrium profiles actually undertaken, the charge them appropriate interest rates. Since these introduction and establishment of moral norms may relationships are the very mechanism through which favour the selection of the co-operative equilibrium information about the borrower and his/her ability by restructuring the incentives of individuals to repay is indicated to the lender, the segmentation adhering to these norms. Incentives are brought in by borrower-lender clusters often arises. line with the co-operative strategy in one of two In China, many households in rural poor areas ways: deviant actions become eliminated from the have long been involved in cooperative action, strategy set of people because such actions are not for example through mutual support and benefit undertaken in society, or else they are made more schemes for resolving social and community costly - possibly too costly to still be a best response problems. Chinese values relating to friendship, - when adoption of the norms changes people’s reciprocity, responsibility, tolerance, helpfulness preferences. Distinct allocation rules dictate what and care for other living beings is highly evident one must do to acquire one’s livelihood, and in in their daily lifestyles. There is deep bond among so doing they impose characteristic patterns of individuals belonging to family or communities. interaction on people, thus influencing the process of The concept of family is much broader in China, human development and affecting tastes, identities in the sense that it is not just limited to one’s own and values. For example, once an economic immediate family, but is extended to include the institution becomes more formal and market-like, community, the neighborhood, the village and even the structure of social interactions changes with it the entire country. This forms the bedrock of social and thus affects the evolution of norms by altering capital in China. The households in these groups the returns to relationship specific investments such are aware of each other and better able to monitor as reputation building, social sanctions. Different each other and to enforce each others’ repayment. economic institutions will affect and be affected 130 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 by norms to varying degrees and in varying ways. as the moneylender has access to several classes of It can be made in the case that imperfect markets means, including harassment and force, to ensure with asymmetric information of people actions and repayment. Interest rates are often set in such a types, and with the ensuing incentive constraints, way that full repayment is unlikely and unexpected are more strongly and intricately tied to norms than from the lender’s side, and the loan is used as a markets characterized by perfect or close-to-perfect way to secure asset transfers or long-term indenture information and zero transactions costs. relationships with borrowers and their families. Defaulting borrowers relied on kin and close Collateral Mechanism friends to meet demands for repayment. Failure to The rural credit markets is the problem of satisfy these demands does, however, often lead information asymmetry, i.e., formal financial to exclusion from the loan. The poorest members institutions are imperfectly informed about the face a larger risk of being subject to exclusion. characteristics of the borrowers and they are not In the rural poor areas, the households are more able to separate good risks from bad risks. This is concerned about the setting and maintenance of their known as the problem of adverse selection wherein reputation because it is a kind of intangible capital even though the characteristics of the borrower are which can brings "rents" reputation for owners and unobservable to these institutions, they do affect significantly increases the competitive advantage. the repayment outcome of the loan. So the lender The reputation formation is not short term can try to deal with this information problem by speculation but long-term and stable investment offering loan terms, that only good risks will be which can increases the chance of getting loan from accepted and the typical method of doing this is to the formal and informal institutions. Constraint ask the borrower to pledge the collateral. The use of mechanism of social capital is mainly characterized collateral can help in reducing the transaction costs. by a person's reputation which also is the so-called But the poor, who are in dire need of the capital, word-of-mouth. The reputation can further sublime may not be able to pledge any collateral. Even when the popularity which is like an invisible shadow to they do own some asset they are not having the restrain his behavior. Once people fails to repay, formal titles of ownership and thus these assets do he/she will be talked about so often that everyone not make useful collateral. However, the borrowers’ knows him/her and it will be difficult to move a reputation, or the social networks to which they single step even be expelled out of the community. belong, takes the place of traditional physical or financial collateral. With regard to social capital, EMPIRICAL ANALYSIS it can be considered as the structural dimension of In this section, we want to examine the social capital to take part in the community groups impact of social capital on the loan. The data is which leads to poverty reduction in rural areas. extracted from the questionnaire about the rural Being a member of a community group can bring poor households in Inner Mongolia Autonomous various benefits, such as improved self-esteem and Region. The availability of getting loan can be security for time of emergencies. So they value classified into two parts: possibility and reality. seriously their reputation in the group and they will Applying bivariate logistic regression model and try their best to keep good reputation instead of Tobit model respectively, we will examine the defaulting. Once they borrowed from others, they impact of social capital on borrowing possibility will make effort to repay in case of destroying their and loaning availability. reputation. Model Punishment Mechanism We can discuss the impact of social capital The lending relationships that moneylenders on getting loan possibility by bivariate logistic cultivate with the borrowers are of a long term regression model. Model is as follows: nature, and they are usually based on a pattern of  py=1 personal interactions with the borrowers and their Y =  (1) families. These relationships are by nature unequal, 10−=py SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 131

Here, the households either want to borrow or relationship with neighbors, friends, colleagues, not. If they want, we assume y=1. Otherwise, y=0. P relatives and etc. Especially on some days in rural denotes the possibility of households’ getting loan. areas, such as festival, weddings, funerals, people In addition, we discuss the impact of social will spend much money to make relationship. So capital on getting loan reality by Tobit model. expenditures on relationship can be considered Model is as follows: as the complexity of the social network. The independent variable x denotes other characteristics of the households. β is regression intercept term. 0 **β , regression coefficient. µ , random disturbance Y=+β01 sx β + βµ 2 + Y >0 i Y =  (2) term.  00Y ≤ Variables Explanation Here, the dependent variable y denotes the The household is the basic unit in our study. reality of households getting loan. The independent Reference to relevant literature, some correlated variable s denotes the households’social capital. factors (such as age, gender, education and etc.) In general, indictor selection of social capital in which can be represented on some extent as literatures is diversified because it is difficult to the characteristics of households borrowing are measure accurately. Here, we select expenditures combined into attributes of household. on relationship as the indictor of social capital. Some main variables are introduced in the In China, many people greatly care about the table 1.

Table 1 Descriptive statistics of the main variables Number Minimum Maximum Mean Standard Variable name of cases value value value deviation Household head’s age 880 19 92 49.97 16.156

The square of household head’s age 880 361 8464 2757.65 1755.673 Education level of household head 880 1 8 2.6 1.33 Household head’s gender 880 0 1 0.6 0.489 Whether the household head is a member of the party 880 0 1 0.25 0.475 Social expenditure 880 200 100000 1968.34 4634.379 Resident population 880 1 11 2.75 1.441 Quantity of labour force 880 1 5 2.27 0.948 Total income 880 500 150000 23076.41 48610.024 Contract the land 880 0 160 31.31 26.632 Total value of operating assets 880 100 846000 35900.42 112900.31 Possibility of debit and credit 880 0 1 0.51 0.491 Authenticity of debit and credit 880 0 80000 1393.7313 2132.1932 Source: investigation Related variables and values are listed in the following table 2: 132 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Table 2 Name and meaning of the main variables. Variable Variable name Variable meaning Explanation ag Household head’s age Age (years) The square of household age-2 Square the age of the household head head’s age 1= illiteracy / semi-literate; 2= primary school; 3= junior high school; 4= Characteristics High school / Technical secondary Education level of household variables of edu school / Technical school / Vocational head household head high school; 5=Junior college; 6=undergraduate college; 7=master; 8=doctor gender Household head’s gender 0=female; 1= male Whether the household head status 0=no; 1=yes is a member of the party Social capital fri Social expenditure yuan pop Population size people Population attributes labor Quantity of labour force people earning Total income yuan Economic attributes land Contract the land a unit of area asset Total operating assets yuan poss Possibility of borrowing 0=no; 1=yes real reality of loan amount of money (yuan) Possibility of borrowing from poss-B 0=no; n1=yes formal finance Characteristic variables Reality of borrowing from real-B amount of money (yuan) of loan formal finance Possibility of loan from poss-F 0=no; 1=yes informal finance Reality of loan from informal real-F amount of money (yuan) finance SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 133

Plugged these above variables into equation Here, y denotes real loan amount. , regression

(1), we can obtain bivariate logistic regression intercept term. βi (i=1; 2; 3····), regression model of the impact of social capital on coefficient. µ , random disturbance term. households’borrowing possibility. See equation (3). RESULTS Ln[ P / (1− P )] =+αα01 age + α 2 age-2 + α 3 edu + α 4 sex

+α5member ++ αα 67 fri pop + α 8 labor (3) The impact of social capital on borrowing

++αα9earn10 land + α11 asset + ε possibility Following the model described earlier, we Here, p is still the possibility of borrowing. conduct an econometric analysis to study the

α0 impact of social capital on borrowing possibility. , regression intercept term. (i=1; 2; 3····), Our estimated results show in table 3. αi regression coefficient. ε , random disturbance The impact of social capital on getting loan term. reality Similarly, Plugged these above variables into We can apply Tobit model to study the impact equation (2), we can obtain Tobit model about the of social capital on loan reality. Our estimated impact of social capital on households’loan reality. results show in table 4. See equation (4).

LnY=+ββ age + β age-2 + β edu + β sex + β member 01 2 3 4 5 (4) ++ββ6fri 7 pop + β8 labor + β9 earn + β10 land + β11 asset + µ

Table 3 Empirical results of impact of social capital on borrowing possibility Informal Variable name borrowing Formal finance finance 0.062*** 0.053*** Household head’s age 0.094***(0.03) (0.012) (0.011) -0.112*** -0.107*** -0.072*** The square of household head’s age (0.014) (0.029) (0.012) Characteristic variables -0.031*** 0.014*** -0.024*** Education level of household head of household head (0.006) (0.012) (0.006) -0.045 -0.174 0.045 Household head’s gender (0.059) (0.098) (0.057) Whether the household head is a -0.086 0.014 -0.13 member of the party (0.088) (0.023) (0.01) 0.053*** 0.0049*** -0.032*** Social capital Social expenditure (0.001) (0.003) (0.003) 0.012*** 0.05** 0.09** Number of resident population (0.014) (0.017) (0.014) Population attributes 0.033** 0.089** 0.063** Quantity of labour force (0.021) (0.035) (0.24) -0.023*** 0.034* -0.027* Total income (0.07) (0.015) (0.06) 0.08* 0.08 0.005 Economic attributes Contract the land (0.04) (0.04) (0.004) 0.097*** 0.075*** 0.13*** Total value of operating assets (0.013) (0.012) (0.012) Note: the standard deviation of the estimated value is in brackets; *** indicates a significant level of 1%, ** in- dicates significant at 5% level, * indicates significant at 10% level; All results are the model results of robustness variance. 134 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Table 4 Empirical results of impact of social capital on loan reality Formal Informal Variable name loan finance finance -0.372*** -0.67*** -0.32*** Household head’s age (0.08) (0.194) (0.08) -0.53*** -0.82*** -0.48*** The square of household head’s age (0.082) (0.27) (0.095) Characteristic -0.13*** 0.145*** 0.156*** variables of Education level of household head (0.035) (0.08) (0.04) household head -0.032 -1.7 0.37 Household head’s gender (0.35) (0.79) (0.38) 0.75*** 0.45 0.15 Whether the household head is a member of the party (0.4) (0.56) (0.11) 0.058*** 0.121*** 0.048* Social capital Social expenditure (0.023) (0.048) (0.025) 0.57*** 0.48** 0.62** Number of resident population Population (0.087) (0.23) (0.098) attributes 0.37** 0.79** 0.43** Quantity of labour force (0.13) (0.32) (0.15) 0.053*** -0.037* 0.069* Total income (0.012) (0.04) (0.011) Economic -0.029* 0.07 0.028 Contract the land attributes (0.015) (0.023) (0.02) 0.093*** 0.036*** 0.018*** Total value of operating assets (0.05) (0.015) (0.02) The age has significant positive impact on possibility. The more he/she has social expenditure, borrowing tendency instead of loan reality. As we the more he/she has social network, which can discovered that the older you are, the more you enforce his/her credit so that he/she is thought to want to borrow, but in fact more difficult you get have capacity to repay the loan. Thus, he/she can loan when you are old enough. have more chance to get loan from formal financial The education level has significant negative institution. In fact, he/she can get loan from formal impact on borrowing tendency. One who educated or informal finance. high level is probably more prudent for financial The population and labor force in households risk and tends to rational expenditure. However, it has positive impact on borrowing possibility. The has positive impact from formal finance instead of more population, the more demands. So households from informal finance. In addition, if one educated need more money to make a living. Also, these high level, he will be trustworthy so that the reality households will be trusted to have strong and stable of getting loan is higher than others. payment capacity by informal finance or formal The gender has negative impact on borrowing finance and they can get loan relatively easily. possibility. In general, the female is conservative The income has significant negative impact and she would like to limit expenditures in on borrowing possibility. If a household is wealthy, accordance with her income. In case of borrowing, he/she often does not have needs to borrow or she often borrows from informal finance because it avoids borrowing, especially from informal finance is more available than from formal finance. because of higher risk and higher interest rate than When the household is a member of the party, formal finance. Perhaps, on account of the income he /shewouldn’t like to borrow due to“face”or he/ considered as the invisible collateral and payment she needn’t to borrow. Once he/she wants to loan, strength, the wealthy household get loan easier than he often can get loan whatever from informal the poor. finance or formal finance attributes to his reputation The contracted lands in rural areas have no or good relationship. significant impact on borrowing possibility and loan The social capital is very important for reality. The right of management of these contracted household. It has significant impact on borrowing lands can be mortgaged but the ownership can’t. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 135

The operating assets have positive impact on International Journal of Social Economics, possibility and reality as they are very important 2015. resources for households which can be mortgaged. [5] Bourdieu, Pierre, The Forms of Social Some assets, such as large-scale production Capital, In Handbook of Theory and equipment, valuable orchard and trees, poultry and Research for the Sociology of Education, livestock and so on, which can be sold off fast, can Edited by Richardson, John G., and C.T. be regarded as guarantee to repay the loan. Hence, Westport: Greenwood Press, 1986. all of financial institutions are willing to lend to [6] Burt, Ronald, Structural Holes: the Social them. Structural of Competition, Cambridge MA: Harvard University Press, 1992. CONCLUSION AND POLICY [7] Bian, Yanjie, Bring Strong Ties Back IMPLICATION in: Indirect Connection Bridge, and Job Using investigation data of rural poor areas Search in China, American Sociological in Inner Mongolia Autonomous Region in China, Review, 1997. this paper has empirically analyzed how social [8] Bramoulle, Yann, and Rachel, Kranton, capital affects the borrowing possibility and Risk-Sharing Networks, Journal of loan reality of households. Our study concludes Economic Behavior and Organization, that the age, education, gender, political status, Vol.64, No.2, pp.275-294.2007. social expenditure, population and labor force, [9] Bloch, F., G.Genicot, D.Ray, Informal income as well as lands and assets, have impact Insurance in Social Networks, Journal of in different degrees on the borrowing possibility Economic Theory, Vol.143, No.2, pp.36- and loan reality. Especially for social capital, as 58. 2008. an invisible advantage and mortgage, it can help [10] Banerjee, A., A.Chandrasekhar, enhance households’ credit so as to get loan more E.Duflo, and M.Jackson, The Diffusion easily from formal finance and formal finance. of Microfinance, NBER Working Paper, This calls for policy-makers to seriously consider No.w17743. 2012. further improving the credit rating system of [11] Biggart, N.W., Castanias.R.P, rural poor households involved social capital as Collateralized Relations:The Social in collateral. Simultaneously, the financial institutions Economic Calculation, American Journal should reform loan mechanism and improve of Economics and Sociology, 2001. service attitude. As for rural poor households, it is [12] Christof Van Mol, Joris Michielsen, necessary to accumulate their traditional and new The Reconstruction of a Social Network social capital to promote their credit rating. Abroad, An Analysis of the Interaction Patterns of Erasmus Students, Mobilities, REFERENCES 2015. [1] Angelucci, Manuela, Giacomo DeGiorgi, [13] Coleman, James, The Foundations of MarcosRangel and Imran Rasul, Insurance Social Theory, Cambridge, M.A.:Belknap in the Extended Family, 2008. Press of Harvard University Press, 1990. [2] Attanasio, O., A.Barr, J.C.Cardenas, [14] Chen, Zhao, ShiqingJiang, MingLuand G.Genicot, and C.Meghir, H.Sato, How do Heterogeneous Social Risk Pooling, Risk Preferences, and Social Interactions Affect the Peer Effect in Network, American Economic Journal: Rural-Urban Migration: Empirical Applied Economics, 2012. Evidence from China, LICOS Discussion [3] Ambrus, A., M.Mobius, and A.Szeidl, Paper Series227, 2008. Consumption Risk-Sharing in Social [15] Chen J.and Narisong Huhe, Social Networks, Harvard University Working Networks, Informal Accountability, and Paper, 2010. Public Goods Provisionin Rural China: [4] Bhawani Singh Rathore, Social capital: A Reassessment, APSA 2010 Annual does it matter in a microfinance contract?, Meeting Paper, 2010. 136 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

[16] Coate, S., M.Ravaillon, Reciprocity Quarterly Journal of Economics, Vol.124, without Commitment: Characterization 2009. and Performance of Informal Insurance [28] Karlan, D., Social Connections and Group Arrangements, Journal of Development Banking, the Economic Journal, Vol.117, Economics, Vol.40, No.2, pp.1-24.1993. pp.52-84.2007. [17] Chantarat, S., and C.Barrett, Social [29] Karlan, D.and J.Morduch, Access Network Capital, Economic Mobility to Finance, in Rodrik, Dani and and Poverty Traps, Journal of Economic M.Rosenzweig (Ed.), Handbook of inequality, Vol.2, No.2, pp.1-22.2011. Development Economics, Vol.5.2010. [18] Dolfin, Sarah, and Garance Genicot, What [30] Kinnan, Cynthia and R.M.Townsend, Do Networks Do? The Role of Networks Kinship and Financial Networks, Formal on Migration and‘Coyote’Use, Review of Financial Access and Risk Reduction, the Development Economics, Vol.14, No.2, American Economic Review, Vol.102, pp.343-359.2010. No.3, pp.289-293.2012. [19] Elizabeth Muthuma, From Concept to [31] Lin Nan, Social Resources and Instrument Data: A Methodological Note on Social Action, In Social Structure and Net Work Capital, Méthod(e)s: African Review of Analysis, Edited by Marsden, Peter, Social Sciences Methodology, 2015. Nan Lin, and Beverly Hills, CA: Sage [20] Freedman, Maurice, Lineage Organization Publications, Inc., 1982. in Southeastern China.Oxfordshire: Berg, [32] Mitchell, J., The concept and use of social 2004. networks, In J.Mitchell(eds.), Social [21] Feder, G., Lau, L.J. , Lin, J.Y. , &Luo, networks in urban situations.Manchester: X. , The relationship between credit and Manchester University Press, 1969. productivity in Chinese agriculture :a [33] Munshi, Kaivan, and Mark Rosenzweig, microeconomic model of disequilibrium, The Efficacy of Parochial Politics: Caste, American Journal of Agricultural Commitment, and Competence in India Economics, 1990. Local Governments, Economic Growth [22] Frances Cleaver, The inequality of Social Center Discussion Paper, 2008. Capital and the Reproduction of Chronic [34] Munshi, Kaivan, Networks in the Modern Poverty, World Development, 2005. Economy: Mexican Migrants in the [23] G.M. Monirul Alam,Khorshed U.S.Labor Market, the Quarterly Journal Alam,Shahbaz Mushtaq. Influence of of Economics, Vol.118, No.2, pp.549 institutional access and social capital -599.2003. on adaptation decision: Empirical [35] Mogues, T., M.R.Carter, Social Capital evidence from hazard-prone rural and the Reproduction of Economic households in Bangladesh[J]. Ecological Inequality in Polarized Societies, Journal Economics,2016,:. of Economic Inequality, Vol.3, No.3, [24] Granovetter, Mark, The Strength of Weak pp.193-219.2005. Ties, American Journal of Sociology, [36] McKenzie, D.and H.Rapoport, Network 1973. Effects and the Dynamics of Migration [25] Grootaert, C., Social Capital, Household and Inequality: Theory and Evidence Welfare and Poverty in Indonesia, World from Mexico, Journal of Development Bank Policy Research Working Paper, Economics, Vol.84, No.2, pp.1-24.2007. No.2148.1999. [37] Putnam, R., R.LeonardiandR.Nanetti, [26] Jacobs, Jane, The Death and Life of Great Making Democracy Work: Civic Tradition American Cities, New York: Random in Modern Italy. Princeton: Princeton House, 1961. University Press, 1993. [27] Karlan, D., M.Mobius, T.Rosenblat, and [38] Peng, Yusheng, Kinship Networks and A. Szeidl, Trust and Social Collateral, Entrepreneurs in China`s Transitional SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 137

Economy, American Journal of Sociology, Systems in Low-Income Economies, the Vol.109, No.5, pp.1045-1074, 2004. Journal of Economic Perspectives, 1995. [39] Samphantharak, Krislert and Robert [44] Van Bastelaer, Thierry, Does Social M.Townsend, Households as Corporate Capital Facilitate the Poor’s Access to Firms: An Analysis of Household Finance Credit? A Review of the Microeconomic Using Integrated Household Surveys Literature, Social Capital Initiative and Corporate Financial Accounting, Working Paper, 2000. In Econometric Society Monograph [45] Xiao heng, Deng, Yan Pan, Hailan Shen, 46.Cambridge, U.K.: Cambridge Jingsong Gui, Credit distribution for University Press, 2010. influence maximization in online social [40] Stiglitz, Joseph E., Formal and networks with node features, Journal of Informal Institutions, In Social Capital Intelligent & Fuzzy Systems, 2016. : A Multifaceted Perspective, The [46] Xu, Yiqing and Yang Yao, Social Networks International Bank for Reconstruction and Enhance Grassroots Democracy: Surname Development, The World Bank, 2000. Groups and Public Goods Provision in [41] Tsai, L.Lily, Accountability without Rural China, CCER Working Paper, 2009. Democracy: Solidary Groups and [47] Yanhao, Wei, Pinar Yildirim, Christophe Public Goods Provision in Rural China, Van den Bulte, Chrysanthos Dellarocas, Cambridge: Cambridge University Press, Credit Scoring with Social Network Data, 2007. Marketing Science, 2015. [42] Townsend, M.Robert, Risk and Insurance [48] Zhang, Xiaobo and Guo Li, Does Guanxi in Village India, Econometrica, 1994. Matter to Nonfarm Employment?, Journal [43] Townsend, M.Robert, Consumption of Comparative Economics, 2003. Insurance: An Evaluation of Risk-Bearing 138 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

COMPARATIVE STUDY ON SALARY AND WAGES OF CROP PRODUCTION ENTITIES

G.Chuluuntsetseg (Ph.D), Ch.Davaasuren (MBA) School of Business and Economics Agricultural University of Mongolia

Email: [email protected], [email protected]

Abstract Hereby presents results of the study carried out for purposes of assessing current situation of reporting of payroll expenses by wheat producing entities, identifying pressing issues, comparing minimum level of wages against one in other countries, and finally proposing recommendations in relation to enhancement of reporting of the payroll expenses. Key words: employer, insured, taxpayer, contractual workers

INTRODUCTION that received incentives regularly from the Crop Transition of Mongolia into market-oriented farming production fund in recent 5 years in relation economy has resulted in breakdown of salary and to their the current practice of reporting salary and remuneration system built-up during the previous wage expenses. regime, thereby allowing employers or management Current and future return is highly dependent of industries and corporate entities to decide salary on manner how a company is supplied with the issues at their discretionary power. This is one of human resource that is the most inexhaustible the key reasons causing violation of employee’s resource among all resources required for efficient interest, reduction in labor productivity, and hike in and sustainable operation of a company and how unemployment in the labor market. their salary and wages are calculated. External International best practice shows that salary sources of information that potentially provide and remuneration system and productivity outcome wages expense reporting are information on receipt is highly dependent on the capacity to deal with of pension and benefits from social insurance fund core issues of “Business triangle” in salary and and receipt of refund on tuition and housing credits remuneration. For instance, organization’s end- under the Individual income tax law. results depends upon how it has appropriately come with solution on three issues: for investors, amount STUDY APPLICATION AND of funding invested into salary, remuneration and METHODOLOGY labor force, and its utilization results; for managers, The study will utilize data from the salary ensuring balanced cohesion between returns gained and wage withholding tax return (TT-1) and social to organization and employees’ contribution to insurance premium return (ND-7) declared by 32 derive this income; and for employees, ensuring crop farming entities of Selengeaimag on basis on stable workplace to sustain their key necessity that confidential agreement. motivates towards work and labor.This analysis 32 entities in 7 soums of Selenge aimag are will be carried out based on comparative review of selected for the Study. Total salary is relatively e-balance, salary and wage withholding tax return different due to differences in number of employees and social insurance premium return declared by of the selected entities. This can be seen in Chart 1. selected 32 entities in 7 soums of Selenge aimag STUDY APPLICATION AND METHODOLOGY

The study will utilize data from the salary 32 entities in 7 soums of Selenge and wage withholding tax return (TT-1) aimag are selected for the Study. Total and social insurance premium return (ND- salary is relatively different due to 7) declared by 32 crop farming entities of differences in number of employees of the Selengeaimag on basis on confidential selected entities. This can be seen in Chart agreement. 1. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 139 Chart 1 Total salary in the Withholding tax return and Social insurance return submitted by Chart 1 Total salary in the Withholding tax return and Social insurance return submitted by the selected entities, the selected entities, in thousand tugrugs, 2013 in thousand tugrugs, 2013

250000.00 200000.00 150000.00 100000.00 50000.00

0.00 1 2 3 4 5 6 7 8 9 1011121314151617181920212223242526272829303132

ХХОАТ тайлан НД тайлан

Source: Researcher’s estimation Source:Researcher's estimation

TheThe total lowestlowest salarysalary of of the the selected selected entities entities was220,086 1,968 thous.tugrugs thous.tugrugs in 2013.and the highest was was 220,0861,968 thous.tugrugs thous.tugrugs andin 2013. the highest was

Chart 2 Total salary in the Withholding tax return and Social insurance return submitted by ChartChart 1 Total 2 salaryTotal insalary the Withholding in the Withholding tax return andtax Socialreturn insurance and Social return insurance submitted return by the submitted selected entities, by the selected entities, inthousand tugrugs, 2017 inthousandthe selected tugrugs, entities, 2017 inthousand tugrugs, 2017

Source:Researcher's estimation Source: Researcher’s estimation

ChartIncreased 3 Box-plot in 2017 respectivelyfor differences to 4,320 in total thousand salary tugrugs in Withholding and 712,369 tax thousand return tugrugs. and Social Increased in 2017 respectively to 4,320 thousand tugrugs and 712,369 thousand tugrugs. insurance return

Chart 3 Box-plot for differences in total salary in Withholding tax return and Social insurance return

Source:Researcher's estimation Source:Researcher’s estimation

Chart 3 illustrates box-plot for differences is extremely different. The salary of total salary as declared in the difference in 2014 compared to previous withholding tax return and in social year was relatively reduced, however the insurance return by the selected entities. number of entities with extreme difference Total salary difference was significantly was pretty much same as in the previous high (interquartile range) or difference of year. Starting from 2015, the salary salary in withholding tax return of half of difference has become to negative value in the entities ranges from -1,140.7 (lower case of most entities. This indicates that quartile) thousand tugrugs to 5,418 total salary in the social insurance return is thousand tugrugs (higher quartile). There higher than that in the withholding tax are 3 entities of which the salary difference return for most entities.

Chart 4 Number of entities having no difference in the withholding tax return and social insurance tax return

14 40% 38% 12 34% 35% 31% 10 12 30% 25% 10 11 25% 8 22% 20% 6 7 8 15% 4 10% 2 5% 0 0% 2013 2014 2015 2016 2017

Зөрүүгүй ААНБ тоо Зөрүүгүй ААНБ-ын түүвэрт эзлэх %

Source:Researcher's estimation As of 2013 22% of the selected withholding tax return and social insurance entities used to declare their salary in the tax return without any difference, and this Chart 3 Box-plot for differences in total salary in Withholding tax return and Social insurance return

Source:Researcher's estimation

140 Chart| SCIENTIFIC 3 illustrates JOURNAL-AGRICULTURAL box-plot for differences ECONOMICS - 2018is extremely different. The salary of total salary as declared in the difference in 2014 compared to previous withholdingChart 3 illustrates tax returnbox-plot and for indifferences social different.year was The relatively salary difference reduced, inhowever 2014 compared the insurance return by the selected entities. number of entities with extreme difference of total salary as declared in the withholding tax to previous year was relatively reduced, however Total salary difference was significantly was pretty much same as in the previous return and in social insurance return by the selected the number of entities with extreme difference was high (interquartile range) or difference of year. Starting from 2015, the salary entities.salary Total in withholding salary difference tax return was significantlyof half of prettydifference much samehas become as in the to previousnegative year.value Starting in high the(interquartile entities ranges range) orfrom difference -1,140.7 of salary(lower in fromcase 2015,of most the entities.salary differenceThis indicates has thatbecome withholdingquartile) tax thousandreturn of halftugrugs of the entitiesto 5,418 ranges to totalnegative salary value in the in social case insuranceof most entities.return is This fromthousand -1,140.7 (lowertugrugs quartile) (higher thousand quartile). tugrugs There to indicateshigher thatthan totalthat salaryin the in withholdingthe social insurance tax 5,418are thousand 3 entities tugrugs of which (higher the quartile).salary difference There are returnreturn is forhigher most thanentities. that in the withholding tax 3 entities of which the salary difference is extremely return for most entities. Chart 4 Number of entities having no difference in the withholding tax return and social Chartinsurance 4 Number tax of return entities having no difference in the withholding tax return and social insurance tax return

14 40% 38% 12 34% 35% 31% 10 12 30% 25% 10 11 25% 8 22% 20% 6 7 8 15% 4 10% 2 5% 0 0% 2013 2014 2015 2016 2017

Зөрүүгүй ААНБ тоо Зөрүүгүй ААНБ-ын түүвэрт эзлэх %

Source: Researcher’s estimation Source:Researcher's estimation As of 2013As 22%of 2013 of the 22% selected of entitiesthe selected used to returnwithholding for 2013-2014 tax return but andit was social contrary insurance in 2015- entities used to declare their salary in the tax return without any difference, and this declare their salary in the withholding tax return and 2017. social insurance tax return without any difference, For entities, over-declaration of total salary in and this percentage reached to 38% percent in 2017 the withholding tax return attributes to tax credits with continued increase. (Chart 4) under the Individual income tax law (for instance, Total salary difference of the entities was apartment and tuition) whereas the over-declaration 3,156 thousand tugrugs and 1,601 thousand tugrugs in the social insurance return is might be related respectively in 2014 and 2014 whereas it ranged to increased number of entities having employees from 931 thousand tugrugs to -2,469 thousand retiring (or individuals having interest related to tugrugs in 2016-2017 (Chart 5). This indicates that applying for visa of any countries, applying for average difference of total salary in the withholding salary loan or 8% mortgage loan etc by paying tax return was higher than in the social insurance higher social insurance premium). percentage reached to 38% percent in 2017 For entities, over-declaration of with continued increase. (Chart 4) total salary in the withholding tax return attributes to tax credits under the Total salary difference of the entities was Individual income tax law (for instance, 3,156 thousand tugrugs and 1,601 apartment and tuition) whereas the over- thousand tugrugs respectively in 2014 and declaration in the social insurance return is 2014 whereas it ranged from 931 thousand might be related to increased number of tugrugs to -2,469 thousand tugrugs in entities having employees retiring (or 2016-2017 (Chart 5). This indicates that individuals having interest related to average difference of total salary in the applying for visa of any countries, withholding tax return was higher than in applying for salary loan or 8% mortgage the social insurance return for 2013-2014SCIENTIFIC JOURNAL-AGRICULTURALloan etc by paying higher ECONOMICS social insurance - 2018 | 141 but it was contrary in 2015-2017. premium). Chart 5 Average and conditional difference of total salary declared Chart 5 Average and conditional difference of total salary declared 14000.00 12975.73

12000.00

10000.00 7704.74 8000.00

6000.00 4853.45 5183.45

4000.00 3156.31 1601.89 2000.00 836.82 -1075.02 0.00 2013 2014 2015 2016 2017 -2000.00 -931.57 -2469.55 -2980.80 -4000.00 -3433.02 -4558.31 -4350.78 -6000.00 -4845.46

Дундаж зөрүү Эерэг зөрүүний дундаж Сөрөг зөрүүний дундаж

Source: Researcher's estimation Source: Researcher’s estimation

Declared averageaverage differencedifference was was 3156,3 3156,3 thousand thousand tugrugs tugrugs in 2013in 2013 and anddecreased decreased to 931,5 to 931,5 thousand tugrugsthousand in 2017, tugrugs but negative in 2017, difference but negative was increased difference to 2980,8was increased thousand to tugrugs 2980,8 in thousand 2013. tugrugs in 2013. Chart 6 Number of entities with no difference and negative difference Chart 6 Number of entities with no difference and negative difference

2017 12 6 14

2016 11 4 17 2015 10 7 15

2014 8 12 12

2013 7 11 14

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Зөрүүгүй ААНБ Эерөг зөрүүтэй ААНБ Сөрөг зөрүүтэй ААНБ

Source: Researcher's estimation Source: Researcher’s estimation

As illustrated in Chart 6 the number of J.Stigler was the first who proposed the entities with no difference has gradually establishment of minimum wage level to increased, but the number of entities with regulate labor market relations. The first negative difference still remains law on mimimum wage was adopted in unreduced. 1894 in Austria, followed by in 1896 in New Zealand and 1909 in Great Britain. In 2017 1.1% or 5 employees out of 410 Mongolia increased its mimimum wage employees in selected 32 entities were for level by 25% or to 240,0 thousand tugrugs whom withholding tax was lower than due since January 01 of 2017 as a result of tri- based on minimum wages. 31% of the crop lateral negotiations between labor and producers declared the social insurance social communities. The most countries set based on minimum wages that is on annual the mimimum wage in consistency to 2880,0 tugrugs or 240,0 thousand tugrugs a average salary and ratio of these indicators month. ranges by 40-70%. Tracing back to history since when the minimum wage level was determined,

Chart 7 Minimum wages, by countries, as of 2016, USD/month/ Люксембург 2539 2197 Герман 2275 2138 Бельги 2057 1995 Франц 1993 1655 Израиль 1283 1100 Словени 1055 540 Эстони 520 506 Чех 442 389 Хятад 325 109 Монгол 82 Украин 63 0 500 1000 1500 2000 2500 3000 Source: CIA-The world facebook 2016

In case of Mongolia, a monthly minimum our country to stand at 31 out of 33 wage was 96 USD as of December 31, countries. This amount is lower by 29-33 2016 (at official rate of 2490�) making USD compared to Belorussia, Mexico and Chart 6 Number of entities with no difference and negative difference

2017 12 6 14

2016 11 4 17

2015 10 7 15

2014 8 12 12

2013 7 11 14

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Зөрүүгүй ААНБ Эерөг зөрүүтэй ААНБ Сөрөг зөрүүтэй ААНБ

Source: Researcher's estimation 142 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 As illustrated in Chart 6 the number of J.Stigler was the first who proposed the entitiesAs illustrated with inno Chart difference 6 the number has gradually of entities wasestablishment the first ofwho minimum proposed wage the levelestablishment to of with increased,no difference but hasthe gradually number ofincreased, entities butwith the minimumregulate wagelabor marketlevel to relations. regulate Thelabor first market numbernegative of entities differen with cenegative still difference remains still relations.law on Themimimum first lawwage onwas mimimumadopted in wage was unreduced. 1894 in Austria, followed by in 1896 in remains unreduced. adopted in 1894 in Austria, followed by in 1896 in New Zealand and 1909 in Great Britain. In 2017 1.1% or 5 employees out of 410 New Zealand and 1909 in Great Britain. Mongolia In 2017 1.1% or 5 employees out of 410 Mongolia increased its mimimum wage employeesemployees in selected in selected 32 entities 32 entities were werefor whom for increasedlevel by its25% mimimum or to 240,0 wage thousand level by tugrugs 25% or to withholdingwhom withholding tax was lower tax was than lower due thanbased due on 240,0since thousand January tugrugs01 of 2017 since as January a result 01of oftri- 2017 minimumbased onwages. minimum 31% wages.of the 31% crop of theproducers crop aslateral a result negotiationsof tri-lateral negotiationsbetween labor between and labor declaredproducers the social declared insurance the basedsocial oninsurance minimum andsocial social communities. communities. The The most most countries countries set set the wagesbased that onis minimumon annual wages2880,0 that tugrugs is on annualor 240,0 mimimumthe mimimum wage inwage consistency in consistency to average tosalary thousand2880,0 tugrugs tugrugs a month. or 240,0 thousand tugrugs a andaverage ratio of salary these andindicators ratio of ranges these by indicators 40-70%. month.Tracing back to history since when the ranges by 40-70%. minimum wage Tracing level back was to determined,history since J.Stiglerwhen the minimum wage level was determined, Chart 7 Minimum wages, by countries, as of 2016, USD/month/ Chart 7 Minimum wages, by countries, as of 2016, USD/month/ Люксембург 2539 2197 Герман 2275 2138 Бельги 2057 1995 Франц 1993 1655 Израиль 1283 1100 Словени 1055 540 Эстони 520 506 Чех 442 389 Хятад 325 109 Монгол 82 Украин 63 0 500 1000 1500 2000 2500 3000 Source: CIA-The world facebook 2016 Source: CIA-The world facebook 2016

In case of Mongolia, a monthly minimum our country to stand at 31 out of 33 wageIn case was of Mongolia, 96 USD a monthlyas of December minimum wage31, countries.tax Thisreturn amount and social is lower insurance by 29-33 premium was 201696 USD (at as official of December rate of 31, 2490�) 2016 (at making official USD comparedreturn. According to Belorussia, to this Mexico analysis and there rate of 2490₮) making our country to stand at 31 was 7 entities in 2013 for which no out of 33 countries. This amount is lower by 29-33 difference was identified and it was USD compared to Belorussia, Mexico and Russian increased to 12 entities in 2017. This Federation, and higher by 14-33 USD compared increase implies positive effects, however to India and Ukraine. As the same time it is lower the number of entities with positive and 28-33 times than in Luxembourg, Australia and negative average differences still remains Germany where the minimum wage level is high. unreduced. Average difference was 3156,3 thousand tugrugs in 2013 whereas CONCLUSION it was decreased by 3.3 times or to 931,7 • For purposes of assessing the current thousand tugrugs in 2017. This is a result practice of reporting salary and wage of placing a notification “Please send your expenses for around 450 employees social insurance return” on e-tax system. employed at 32 entities in 7 soums of • Difference in declaration of salary expenses Selengeaimag, an analysis was carried in various returns can be explained by a out based on their financial statements on fact that corporate entities fail to register e-balance, salary and wage withholding their affiliated social insurance offices and SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 143

get receive social insurance certificate in an in relation to salary expenses is fully attempt of evading to pay social insurance declared; premium that is due by employers at 2. In granting incentives from the Crop rate of 11-13%. On average of recent 5 production support fund only tax years, 69% of the crop producers who reference is currently being obtained. are selected for study miscalculated own Social insurance reference should value of crop per tonne. Salary, wages and should be provided starting from this other income identical to them declared year. by entities having difference between tax 3. Local tax offices should validate the and social insurance returns should be Salary, wages and other identical examined against their primary documents income withholding tax return (TT-11) for clarification of underlying reasons, and against the social insurance statement underpaid taxes and social insurance must (SI-7). be made paid to the state budget so that 4. Reference on withholding tax return avoid incurring losses to the employees. on salary, wages and other identical • Compared to other countries the minimum income should be made available wage in Mongolia takes 31st place out of to obtain from the “State service 33 countries. This amount is lower by 29- electronic machine” in a same way as 33 USD compared to Belorussia, Mexico social insurance information reference and Russian Federation, higher by 14-33 USD compared to India and Ukraine and is obtained at current. lower 28-33 times than in Luxembourg, BIBLIOGRAPHY Australia and Germany. It indicates that Mongolia lacks in state sustainable policy Books and newspapers to support small and medium enterprises, A.Choidash. (2012). Fundamentals for and manufactures lack for jobs that can agricultural technology.Ulaanbaatar. satisfy main needs stimulating for labor. Corporate income tax law. (2006). • In disclosure for annual Financial Ulaanbaatar. Statements, the most of the entities (85%) Statistical bulletin of Mongolia. (2016-2017). failed to declare salary expenses (20.3). Ulaanbaatar. Because of lack of workforce during Social insurance statistical bulletin. (2015). crop harvesting, temporary workers Ulaanbaatar. are normally hired on a contract basis. Social insurance statistical bulletin. (2016). Furthermore it is necessary to analyze how Ulaanbaatar. salary expenses of the contractual workers Social insurance statistical bulletin. (2017). are reported. Ulaanbaatar. Social Insurance law. (1994). Ulaanbaatar. RECOMMENDATION 1. Finance and Treasury departments in Labor law. (1999). Ulaanbaatar. Individual income tax law. (2006). local area should fill in the Disclosure Ulaanbaatar. to Annual Financial Statements, in Ts.Tsetsegmaa. (2017). Human resource particular should review whether 20.3 management.Ulaanbaatar. 144 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

MINING SECTOR IMPACTS ON THE MONGOLIAN ECONOMY: INPUT-OUTPUT ANALYSIS

Kadirbyek Dagys1 * (MSc), Nyambat Luvsandorj2 (prof. dr.), Liesbeth Dries3 (associate prof. dr.), Bakey Agipar4 (prof. dr.), WJM Heijman3 (prof. dr.) 1 Management Department, Mongolian University of Life Sciences; AEP Group, Wageningen UR 2 Management Department, Mongolian University of Life Sciences; Daegu University 3 AEP Group, Wageningen UR 3 Research Center for Agricultural Economics and Development, Mongolian University of Life Sciences *[email protected], [email protected]

Abstract Mongolia has experienced rapid growth and significant recession driven by commodity price swings over the last decade. The economic structure of Mongolia has changed as a result of a growth and recession. The one on the main analysis of economic structure, changes and relations of sectors is an input-output technique that developed first by Wassily W. Leontief. The study focuses of the analysis to determine the mining sector impacts on the other economic sectors using input-output analysis. An input-output table of 19x19 matrix of 2011 (the highest economic growth, 17.3%) and 2015 (the lowest economic growth, 2.4%), which is given by the National Statistical Office of Mongolia, used for the output and income analysis. Өнгөрсөн 10 жилийн хугацаанд Монгол Улсын эдийн засаг эрдэс бүтээгдэхүүний үнийн хэлбэлзлээс шалтгаалж өндөр өсөлт болон гүн хямрал аль алинтай нүүр туллаа. Тус улсын эдийн засгийн өсөлт, уналтаас шалтгаалж эдийн засгийн бүтцэд өөрчлөлт ороод байна. Эдийн засгийн бүтцийн, өөрчлөлтийн болон салбаруудын хоорондын уялдаа холбоог В.В.Леонтьевийн орц-гарцын загварыг ашиглаж судалдаг билээ. Энэхүү судалгаа нь орц-гарцын загварыг ашиглаж уул уурхайн салбарын бусад салбарт үзүүлэх нөлөөг тодорхойлоход чиглэгдсэн болно. Монголын Үндэсний Статистикийн хорооноос гаргасан 2011 (эдийн засгийн өсөлт хамгийн өндөр буюу 17.3 хувь) ба 2015 (эдийн засгийн өсөлт бага буюу 2.4 хувь) оны салбар хоорондын тэнцлийг ашиглаж орц болон гарцын шинжилгээг гүйцэтгэв. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 145

1INFLUENCE AND MECHANISM OF TOURISM DEVELOPMENT ON PASTORAL LIVELIHOODS IN INNER MONGOLIA PASTORAL AREAS - TAKE THE EXAMPLE OF THE XILA MUREN GRASSLAND

Wenlong Li1.2 1Inner Mongolia Finance and Economics university Resources and Environment Economy school, Hohhot 010070; 2College of city and environment, Northwestern University Xi’an 710127

ABSTRACT The development of grassland pastoral tourism is an important engine to realize the Rural Revitalization in pastoral areas. In the case of the Inner Mongolia typical grassland tourist destination- the Xila MuRen, the semi structural interview method (PAR) is used to collect data from the herdsman surrounding the tourist attractions, and to draw on the framework of sustainable livelihoods (DFID), to establish the evaluation index system of the livelihood capital of the herdsmen, and use the function model, the obstacle model and other methods. This paper analyzes the livelihood characteristics of four types of herdsmen, calculates the stock of livelihood capital, compares the livelihood strategies, and discusses the factors affecting the herdsmen’s participation in grassland tourism. The results showed that: 1The development of grassland tourism made herdsmen formed four types of herdsmen with different combinations of livelihoods, namely, pure herdsmen, labor dominated herdsmen, tourism dominant herdsmen, and tourism exclusive herdsmen. 2The development of grassland tourism has raised the living capital stock of the herdsmen in general, but there are significant differences among all kinds of herdsmen. 3The obstacles of pastoral participation in the development of grassland tourism are: human capital, financial capital, material capital, social capital and natural capital. 4 The development of grassland tourism is influenced by two aspects of the influence of the evolution of the social ecosystem and the livelihood capital of the herdsmen. At the same time, the basic characteristics of the herdsman’s own family and the attitude to the development of the grassland tourism affect the development of the grassland tourism. Key words: grassland tourism; pastoral livelihoods; obstacles; grassland of Xila MuRen;

The grassland area accounts for 41.7% of the As an important participant in the development country’s land area. The grassland tourism resources of grassland tourism, herdsmen are the direct are abundant, and the development potential of undertakers of the development of grassland grassland tourism is huge. In recent years, grassland tourism. With the development of grassland tourism has developed rapidly. Pastoral areas and tourism, the livelihood capital, livelihood and herdsmen have become the focus of attention. With livelihood strategies of herdsmen have changed and the theme of leisure and sightseeing as the theme evolved, and there are significant differences in the of grassland tourism, the role of [1-6] in promoting path of livelihood evolution for different types of the sustainable development of economy, herdsmen. How to improve the livelihoods capital of culture, environment and society in pastoral herdsmen, enrich the way of livelihood and optimize areas is becoming more and more important. It the livelihood strategy?It plays an important role in is an important way to achieve precision poverty the sustainable development of grassland tourism. alleviation and Rural Revitalization in pastoral Therefore, based on the framework of Sustainable areas. It is also an important choice for farmers to Livelihoods Framework (DFID), the evaluation diversify their livelihoods, increase their livelihood index system for the livelihood capital of herdsmen capital and improve their living standards. is set up. Based on the survey data of the herdsman

1 Foundation item: Youth Project of National Social Science Fund (serial number: 17CGL024); The author: Li Wenlong (1986-), man (Manchu), a doctoral student in Chifeng, Inner Mongolia, mainly engaged in the evolution of rural human land system and the study of tourism geography. E-mail:[email protected]. 146 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 in the pastoral area of the typical steppe tourism visited the relevant functional departments of the area in Inner Mongolia, this paper analyzes the town government and other relevant functional characteristics of the livelihood capital of different departments, collected the climate, society, livelihood types of herdsmen, the calculation of the economy and the typical rural “three capital” and stock of the livelihood capital, and the comparative other background information, and conducted analysis of the strategies for the livelihood of sampling interviews with a small number of the herdsmen. A brief combination of model, herdsmen. Two administrative villages, 4 natural portraying the evolution process of different types villages and the herdsman around the town of of herdsmen, analyzing obstacles that hinders hermu Ren were investigated by questionnaire herdsmen to participate in grassland tourism, and and semi structured interview. Supplementary combing the mutual feed mechanism of grassland investigation was carried out in October. In tourism and herdsman’s livelihood, and putting October, the vacations were used to investigate and forward some countermeasures and suggestions for verify the problems of incomplete data and lack of the development of grassland tourism[7-10]. background data in the questionnaire. Among them, 400 questionnaires were issued, including 344 RESEARCH AREA AND DATA effective questionnaires and 94% questionnaires. SOURCES The contents of the questionnaire included the basic situation of the herdsman family, the livelihood Research area capital, the perception and attitude of the herdsmen The town of hilamuren is located in the on the grassland tourism. southeastern part of the United flag of the Baotou city of Da homemamamemen. By 2017, there RESEARCH METHODS were 3 khakha (administrative villages) and 73 haotuwu (Figure 1), with a total number of 1015 Classification of types of herdsmen households, with a total population of 2328. The This paper, based on the main source of family tourism industry is the dominant industry in the economy, the existing way of making a living and town. There are 183 tourist attractions in total, 3680 the direction of the main labor input, divides the in Mongolia, with the name of “the whole people herdsmen into four types: pure pastoral, work participating in tourism”. In 2017, 1 million 101 oriented, tourism leading and tourism exclusive. thousand visitors were received and the operating Among them, pure herdsmen accounted for 22.4% income reached 535 million yuan, and the tourism of the total sample, 15.7% of tourism monopolize income accounted for about 80% of the per capita herdsmen, 36.6% of migrant workers, 25.3% of net income. Before the development of grassland tourism oriented herdsmen. tourism resources, the livelihoods of herdsmen in the study area were dominated by traditional animal RESULTS AND ANALYSIS husbandry, with a small amount of herdsmen going out to work. After the development of grassland Analysis of the main characteristics of tourism, the grassland tourism industry and the herdsmen “forbidden animal” were influenced by the policy of Under the influence of the development of the “grassland tourism” and “prohibition of grazing”. grassland tourism, the livelihoods of herdsmen in Survival demand and government policy guidance, the grassland tourism have also been constantly local large numbers of herdsmen began to operate evolving, forming a pure pastoral, work oriented, animal husbandry or tourist shops, and the number tourist oriented and tourism exclusive means of of tourist livelihood herdsmen increased by [10-23]. livelihood. By Median test, the age of the four types of herdsmen, the education degree of the adult 1.2 sources of data labor force and the family rules are found. There From July 2017 to December, the research is a significant difference in the contents of model, group carried out field investigations in a total labor force proportion and per capita annual income of three times. Pre investigation: in July, we (Table 1). SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 147

Table 1 characteristics of descriptive indicators of four types of herdsmen Tourism Tourism Family Pure herdsman Work oriented exclusive type dominant type Chi- characteristics Median square of herdsmen mean standard mean standard mean standard mean standard value deviation value deviation value deviation value deviation Age of head of 2.38 0.44 2.31 0.57 2.20 0.36 2.28 0.43 2.2 31.22* household Educational level of adult 0.43 0.22 0.58 0.36 0.51 0.33 0.55 0.37 0.4 20.40* labor Family size (person / 3.30 1.32 3.4 1.44 3.6 1.30 3.4 1.65 3.3 21.73** household) Proportion of 56.47 21.92 60.82 20.45 59.88 21.37 58.65 16.85 60 8.24** labor force (%) Per capita annual income 0.54 0.88 1.82 0.79 1.22 0.80 1.67 0.54 1.52 77.45** (person / million yuan) Tourism income (person / million 0 0 1.82 0.97 0.52 0.54 1.15 0.68 0.82 68.25** yuan) Work income (man / 10000 0 0 0 0 0.43 0.61 0.35 0.55 0.59 22.41** yuan) Livestock income (man / 0.54 0.88 0 0 0.12 0.24 0.09 0.18 0.33 48.66** 10000 yuan) Per capita meadow area 32.41 0.73 10.52 0.42 20.37 0.22 9.66 0.44 26.20 33.41** (human / hectare) The number of Mongolia 2.40 0.11 36.44 0.46 2.2 0.19 7.43 0.25 18.31 50.11** packages (a) Accessibility 0.37 0.93 0.58 0.69 0.54 42.56** Sample number 77 54 126 87 --

Analysis on the characteristics of Natural capital: from high to low, natural herdsmen’s livelihood capital capital of herdsmen is pure pastoral (0.506) The development of grassland tourism, as a > tourism exclusive type (0.441) > tourism direct engine for the development of rural social dominant (0.422) > work oriented (0.408). and economic development in pastoral areas, not Material capital: the material capital of the only changes the means of livelihood and livelihood herdsman from high to low ranking is tourism strategies of herdsmen, but also changes the stock exclusive (0.884) > pure animal husbandry of the livelihood capital of the herdsmen. Under the type (0.822) > tourism leading type (0.711) > influence of the development of grassland tourism, work oriented (0.673). Finacial capital: the ranking of herdsmen’s there are obvious differences between the five economical capital from high to low is tourism livelihood capital of the four types of herdsmen and exclusive (0.922) > tourism dominant (0.877) the indicators of their livelihood (Table 2). > work dominated (0.453) > pure animal Labor capital: the ranking of herdsmen’s husbandry type (0.390). Labor capital from high to low is tourism exclusive type (0.602) > tourism leading type (0.574) > work dominated (0.509) > pure animal husbandry type (0.488). 148 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Tab2 The quantized livelihood capital values of the different types of households Five major livelihood Tourism dominant Tourism exclusive Pure herdsman Work oriented capital type type Labor capital(L) 0.488 0.509 0.574 0.602 Natural capital(N) 0.506 0.408 0.399 0.423 Material capital(M) 0.673 0.711 0.822 0.884 Finacial capital(E) 0.390 0.453 0.877 0.922 Social capital(S) 0.196 0.221 0.274 0.317 Total livelihood capital 2.253 2.302 2.964 3.148 index(T)

3.3 Identification of obstacle factors for as human capital (39.65%), financial capital pastoral participation in grassland tourism (35.43%), material capital (24.92%), social capital development (19.68%) and natural capital (10.31%). From the The analysis of the obstacle factors for the index level barriers, the first 5 single indicators are herdsmen to participate in the grassland tourism. adult education (19.47%) and adult labor. Force According to the obstacle degree model, the number (19.47%), borrowing situation (13.08%), obstacle degree of herdsmen participating in the community network (10.95%), production and development of grassland tourism is calculated living equipment (9.61%), social participation from the perspective of livelihood capital.From (8.15%) (Table 3). the standard level, the barrier index is ranked

Tab.3 Barrier level of Standard layer and Index layer that affects herdsmen’s participation in Grassland Tourism Standard Finacial capital Labor capital Material capital Social capital Natural capital laye (39.43%) (36.65%) (24.92%) (19.68%) (10.31%) Production Adult Borrowing Adult Community social and living Index Education situation labor force network participation layer equipment (19.47%) (16.22%) (13.08%) (10.95%) (9.61%) (8.15%)

It can be seen from the above analysis that the 3.4 Analysis of the influence mechanism main obstacle factors affecting the development of of grassland tourism on Herdsmen’s livelihood grassland tourism are human capital and financial activities capital. Among them, the lower level of adult As an external disturbance, grassland tourism education and the shortage of labor force are the affects the livelihood activities of herdsmen from main obstacle factors for the herdsmen to participate two aspects of macro and micro aspects. On the in the grassland tourism. In the investigation, macro level, grassland tourism is the direct motive there are serious shortages in the labor force of force of the evolution of the social and ecological the 73.4% pure herdsmen. With the development system of tourism, mainly through the guidance of urbanization and the implementation of the of tourism policy, which directly affects the “forbidden” policy, the situation is becoming conversion of grassland function, the impact of more and more serious, and the lack of a perfect foreign culture on local culture and the impact of financial organization system in pastoral areas. The foreign culture. In the aspects of integration and lack of financial knowledge and financial ability improvement of consumption level, the evolution for herdsmen is another important factor hindering of social ecological system has produced huge herdsmen to participate in the development of pull on Herdsmen’s participation in grassland grassland. tourism; on the micro level, it enriched the source of the livelihood of the herdsmen, raised the SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 149 livelihood capital of the herdsmen, and increased From the standard level, the barriers index the livelihood of the herdsmen. In this context, ranked as human capital, financial capital, material the herdsmen divided into pure herdsmen and the capital, social capital and natural capital. From the dominant migrant workers. There are four types of index level barriers, the first 5 indicators are: adult herdsmen, tourism oriented and tourism monopoly. education level, the number of adult labor force, Herdsmen, in order to improve their livelihood debt situation, community network, production and actively and passively adapt to the endogenous living equipment, social participation. impetus of the evolution of the grassland tourism to The development of grassland tourism affects the social ecological system, affect the development the livelihood of herdsmen from two aspects that of the grassland tourism through two aspects. Under affect the evolution of the social ecosystem and the background of the development of grassland the livelihood capital of the herdsmen. At the same tourism, the herdsmen form different livelihoods, time, the basic characteristics of the herdsman’s face different livelihood risks and present different own family and the attitude to the development of livelihood vulnerabilities, and then take different the grassland tourism affect the development of the attitudes towards the development of grassland grassland tourism. tourism. On the other hand, because of the difference in the characteristics of the livelihood capital of Suggestions the herdsmen, the herdsmen faces the process of The increase of the livelihood capital of the grassland tourism. There are significant differences herdsmen will help the herdsmen to participate in in the obstacle factors. Diversification of obstacles the development of grassland tourism. Therefore, is an important bottleneck for the development of it is necessary for the pure herdsmen to actively grassland tourism. Especially, the unclear path of organize the herdsmen to participate in the tourism specialized herdsmen to tourism scale, grassland tourism, increase the per capita income industrialization and brand transformation is an of the family and improve the enthusiasm of the important reason for the homogeneity development herdsmen to participate in the grassland activities, and vicious competition of the grassland tourism in and provide technical training for the dominant the town of kilinun. herdsmen to improve their skills and promote the family. Income, at the same time provide it CONCLUSIONS AND SUGGESTIONS with the necessary policy support, to promote the transformation of tourism leading herdsmen. For Conclusions tourism leading herdsmen, we should improve the The development of grassland tourism makes financial organization system of pastoral areas, the traditional single animal husbandry of herdsmen standardize the behavior of private lending, and diversify. In this process, the number of traditional provide a platform for tourism training and tourism herdsmen gradually decreases, and the number of activities, and play the leading type of herdsmen to migrant workers and workers is increasing. At the participate in the development of grassland tourism. present stage, four kinds of herdsmen with different The great potential to promote the transformation of livelihood combination patterns and significant tourism dominated herdsmen to tourism monopoly; differences in family characteristics have been for tourism exclusive herdsmen not only to improve formed, that is, pure herdsmen, and the dominant the financial organization system, to standardize type of work. Herdsmen, tourism oriented herdsmen the behavior of private lending, but also to increase and tourism oriented herdsmen. their support for their funds, help the transformation On the whole, the development of grassland of Tourism Management herdsmen to the tourism tourism increased the stock of the livelihood capital industry cluster and brand development, so as to of the herdsmen, but the difference of the different improve the grassland tourism. Product quality to types of herdsmen was significant.The ranking promote the sustainable development of Grassland of livelihoods capital from high to low is tourism Tourism[30]. monopoly type > tourism dominant type > work oriented type > pure animal husbandry type. 150 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

REFERENCES: [10]. LI wen-jie.WU tie-hong. Effect of Tourism on Grassland Tourist Locations: [1]. Wang Xinyue, HouJuanjuan. Gold Saddle Tourist Spots of Xilamuren Characteristics and Types of Spatial- Grassland, Inner Monglolia[J]. temporal Differentiatio n of Tourism ResourcesScience. 2012,34(10):1980- Urbanization Response in Shandong 1987 Province.Scientia GeographicaSinica, [11]. ZHONG Lin-sheng, TANG Cheng- 2017, 37(7):1087-1094.doi:10.13249/j. cai, GUO Hua.Tourism function zoning cnki.sgs. 2017.07.014 of Jinyintan Grassland Scenic Area in [2]. SUN Kun; ZHONG Linsheng; TANG Qinghai Province based on ecological Chengcai.Comparative Analysis sensitivity analysis.[J].Chinese Journal of of the Environmental Influences of Applied Ecology.2010,07:1813-1819. Different Tour Activities on Qinghai- [12]. WU Tie-hong. The Analysis of the Tibet Grasslands[J].Resources Science. Destination Competitiveness Based on the 2013,35(11):2209-2216. Tourist′s Cognitive Image-A case study [3]. LIU Zhi-jun; ZHANG Xin-hua. A of prairie destination.[J]. Journal of Inner Summary on Steppe Tourism Mongolia University(Philosophy and [J]. Value Engineering. 2015,34,(16):252- Social Sciences) .2010,02:91-97. 255. [13]. WU Tie-hong, ZHANG Jie, LI Wen- [4]. YANG Zhi-yong. The Comprehensive jie. The Impact of Regional Cultural Evaluation on Grassland Eco-tourism Differences on Tourists’ Perception of Environmental Carrying Capacity: A Tourism Destination Image - A Case Study Case of Hulunbeier.[J]. Future and of Tourists’ Perception of Prairie Image in Development. 2013,12:104-109. Inner Mongolia Autonomous Region.[J]. [5]. AI lin Study on Ecotourism Environment Tourism Tribune. 2010,06:66-72. Carrying Capacity of Hulunbeier grasslang [14]. LIU Limei, LV Jun. Investigation And in Inner Mongolia, China[J]. Beijing Analysis About Community Participation Forestry University. 2010. In Grassland Tourism Development Inner [6]. Lv Jun. Research of Ecological Security Mongolia.[J]. Journal of Inner Mongolia of Development of Grassland Tourism-A Normal University (Philosophy and Social Case of Inner Mongolia.[D]. East China Sciences Edition). 2013,04:135-139. Normal University.2006. [15]. LV Jun; MENG Yun.The perceptions and [7].LV Jun.LIU li-mei.Research Influence attitudes of community residents towards of Steppe Tourism Development on the the development of grassland tourism. Ecosystem Environment.Journal of Arid [J]. Journal of Arid Land Resources and Land Resources and Environment.[J]. Environment. 2014,05:192-196. 2005,03:110-114. [16]. Zhiguo Yao,Tian Chen, Shoubing [8]. Sun kun.Zhong Lin-sheng. On the Yin, Xingang Li. Regional Tourism evaluation and compensation mechanism Eco-Efficiency Model and an Empirical of tourism ecological negative benefit in Research of Hainan Province.[J]. Scientia Tibet-QingHai grassland.[J]. Resources Geographica Sinica. 2016, 36 (03):417- and Environment in the Yangtze Basin. 423. 2014,09:1322-1329. [17]. YANG zhi-yong. Evaluation of [9]. LV Jun.LIU li-mei. CHEN Tian. Effect of environmental value of grassland Tourism Development on Grassland Soils Ecotourism.[J] Future and Development. in Inner Mongolia. LIU Limei, LV Jun. 2015, 12:104-109. The Environmental Influence of Tourism [18]. ZHONG Lin-sheng, NIU Ya-fei, LIU on Vegetation in Typical Grassland Areas Jia-ming, CHEN Tian .Development of [J]. Resources Science. 2009,03:442-449. Grassland Tourism Resource in Inner SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 151

Mongolia Autonomous Region.[J]. Journal case study in Liupan Mountain. Journal of of Arid Land Resources and Environment. Arid Land Resources and Environment. 2005,02:105-110. 2014, 28(12):190-196. [19]. LIU Min, CHEN Tian, ZHONG Lin- [28]. WANG Zi-qiao, SHI Yu-zhong, YANG sheng.PROGRESS OF GRASSLAND Xin-jun, LIU Chao. Impact of social capital TOURISM STUDY IN CHINA.Human on the rural households’life satisfaction in Geography.[J]. Human Geography. the Loess Plateau:a case of Hongjia Town 2007,01:1-6. in Changwu County[J]. 2017, 40(6): 1317- [20]. MA Lin.Studies on the Exploitation 1327. Strategy of Eco-tourism in Inner Mongolia [29]. REN Tong, LIU Ji-sheng. ANALYSIS ON steppe. Journal of Arid Land Resources & SPATIAL LATITUDE AND OBSTACLE Environment. 2004,04:65-71. OF TOURISM COMPETITION IN JILIN [21]. LIU Min, SHI xue-yong. The Experience PROVINCE [J].Economic Geography. Economy and Steppe Tourism in Inner 2011,31(12):2138-2143. Mongolia. Journal of Arid Land Resources [30]. LI Wenlong; LIN Haiying.Research on & Environment.2004,05:128-131. spatiotemporal dynamic of the passenger [22]. HAO Xiao-lan. The Mode of Grassland flow distribution in inbound tourism Ecotourism Development in Inner destination in Inner Mongolia[J].Journal Mongolia. Journal of Arid Land Resources of Arid Land Resources and Environment. & Environment. 2004, 06:112-117. 2016,30(03):195-201. [23]. HE Ai-lin; YANG Xin-jun; CHEN Jia;WANG Zi-qiao. Impact of Rural Tourism Development on Farmer’S Livelihoods - A Case Study of Rural Tourism Destinations in Northern Slop of Qinling Mountains.[J]. Economic Geography. 2014, 34(12):174-181. [24]. XU Hanshi, YUE zhang. Livelihood capitals, livelihood risks and livelihood strategies of farmers.[J]. Problems of Agricultural Economy. 2012,33(10):100- 105. [25]. SHI Yuding, LI Jianjun. The Multifunctional Development of Rural Tourism and the Rural Sustainable Livelihood: A Collaborative Study. TOURISM TRIBUNE, 2018, 33(2): 15- 26. [26]. CHEN Jia, ZHANG Liqiong, YANG Xinjun, et al. The impact of tourism development on changes of households’ livelihood and community tourism effect: A case study based on the perspective of tourism development mode[J]. GEOGRAPHICAL RESEARCH, 2017, 36(9): 1709-1724. [27]. ZHANG Ruiying, XI Jianchao, GE Quansheng.Renewable energy use selection model in rural tourism area - A 152 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

RESEARCH ON SPATIAL STRUCTURE OF TOURISM COOPERATION BETWEEN INNER MONGOLIA AND MONGOLIA BASED ON THE “POINT-AXIS” SYSTEM THEORY

WANG Shan, LI Jin-kai,NA ri ge le (School of Resources and Environment Economics, Inner Mongolia University of Finance and Economics, Hohhot 010070, China)

Abstract: The research analyzes the spatial structure of tourism cooperation between Inner Mongolia and Mongolia based on “Pole-Axis” system theory that has important theoretical value and practical significance for the development of tourism cooperation between two regions. Hence, according on it, the article also reviews the current tourism cooperation between Inner Mongolia and Mongolia and the combination about both tourism systems, it determines the core tourism city and development axis of the two regions. Finally, it proposes the development of the transnational tourism cooperation space between the two regions, besides, it constructs the tourism space structure named “an axis, dual nuclear, seven zones”. Key words: Tourism cooperation space structure; “Point-axis” system theory; Inner Mongolia; Mongolia

INTRODUCTION and develop cooperation deeply. Hence, build Sino- China and Mongolia have more than 4760 Mongolia tourism cooperation can use tourism as kilometers of border lines and a long history of a bridge of cultural ties. According to advantages friendly interaction, and Mongolia is one of the of location and culture to strength communication first countries to establish diplomatic relations between the two countries so as to promote with China. From their relationship aspect it can economic and culture cooperation. And finally both be seen that, Sino-Mongolia relations experienced of two countries will jointly develop and benefit twist and turns in the mid and late 1960s. After from common international regions [1]. that, their diplomatic relation started normalization In the past ten years, the economic and trade based on their steady bilateral political relations, cooperation between China and Mongolia continues which performed in economic cooperation, to widen that appears in China has maintained the cultural exchanges and etc. Their cooperation status of Mongolia's largest trading partner and has achieved great development. In 2014, when the largest investment source country for many General Secretary Xi Jinping visited Mongolia, years. And according on it, China-Mongolia trade he expressed willingness about cooperating with plays an important role in promoting the economic Mongolia depend on “Silk Road Economic Belt”. In development of Mongolia, which also provides the meantime, Mongolia proposed the “Road of the a realistic basis and development space for Sino- Prairie” initiative, both of “roads” have chance to Mongolia tourism cooperation in various fields. cooperate deeply. Besides, China-Mongolia border Research by domestic scholars on Sino-Mongolian tourism has economic and cultural values which cooperative relations mainly focuses on trade will become a significance part of China-Mongolia between the two countries, and research on tourism economic and trade cooperation gradually. In is relatively rare: Zhan Xiujie (2005) analyzed the addition, tourism will also play an important role tourism market in Mongolia firstly[2]; Sai Na, Hu Wei in national economics of two countries (especially and other scholars (2011) analyzed the problems Mongolia). At present, Mongolia government pays of Mongolia tourism and put forward suggestions more attention to cooperate with China especially on and countermeasures correspondingly[3]; Sun tourism, and Mongolia develop tourism in several Gennian and An Jingmei (2014) analyzed the aspects, such as formulate policies, strengthen interaction between import and export trade of management, improve measures, expand publicity China and Mongolia[4]; Zhan Xiujie (2011) and SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 153

Liu Limei (2016) make a study of Sino-Mongolia 2.1 Cross-Border Tourists is Increasing tourism cooperation development strategy[5,6]; Mongolia is the first-class source country Chinese famous economic geographer name Lu for inbound tourism in Inner Mongolia. Since the Dadao proposes “pole-axis” system theory based implementation of the border-opening strategy in on central land theory, spatial diffusion theory 1992, the number of tourists maintained a steady and growth pole theory in 1984[7]. Recently, many increase except for the impact of SARS in 2003 and domestic scholars have studied the regional tourism the global crisis in 2009. In 2017, the number of development model from the perspective of the tourists entering China from Mongolia exceeded "pole-axis" system theory, but relatively few studies 800,000, and its main area of entry was Inner have focused on border tourism: Liu Yun and other Mongolia. Among them, the main market share is scholars (2014) propose “point-axis-circle” model border tourism at the port. depend on China and Myanmar tourism in spatial In the past ten years, Chinese tourists have structure, and cooperation subject[8]; Yu Famei and always been the largest tourist market in Mongolia. etc (2016) analyzed the development of Tourism In 2017, 199,000 Chinese tourists entered Mongolia Resources Along China-Iran Railway based on and accounting for 37.2% of Mongolia’s foreign “pole-axis” system theory[9]; Li Dong (2017) use tourists. the “pole-axis” system theory analyzed China- Kazakh border tourism corridor space layout[10]. So 2.2 Enrichment of Tourism Cooperation according to the theory of “pole-axis” system is able The tourism cooperation between Inner to analyze the cooperation model between China Mongolia and Mongolia has become an important and Mongolia and both the space form and objective part of the Sino-Mongolia economic and trade law of tourism activity. However, it lacks of relative cooperation. The tourism communication of both researches recently. This article is based on “pole- governments becomes more frequent, In order axis” system theory and the combination of case to encourage enterprises develop cooperatively analysis in order to explore the tourism cooperation and promote tourism products, they have adopted development model between Inner Mongolia and various forms such as meetings, forums, signing Mongolia. Moreover, it aims to complement the agreements, and issuing measures. China-Mongolia empirical study of the "pole-axis" system theory in border opened in 1991 and a year later, China the border tourism development model, and finally National Tourism Administration agreed to carry with a view to providing reference for the research out China-Mongolia border tourism and approved on the development model of border tourism in three border tourism routes in Inner Mongolia. other border areas of our country. Besides, since 2000, the tourism cooperation between two countries has been continuously DEVELOPMENT STATUS OF strengthened. In 2003, the two countries held a TOURISM COOPERATION BETWEEN tourism promotion exchange meeting in Inner INNER MONGOLIA AND MONGOLIA Mongolia. And in 2005, the Mongolian Ministry Inner Mongolia is located in northern China of Roads, Transport and Tourism visited Inner that is bordered by Mongolia’s East Gobi Province, Mongolia, both of them made friendly consultations Oriental Province, South Gobi Province and in tourism cooperation. A year later, China National Sukhbaatar Province and the boundary line is more tourism Administration approved two border than 3,200 kilometers long. There are 10 open ports tourism routes in Inner Mongolia. What is more, to Mongolia and 3 international air ports. Because in 2012, newly established Ministry of culture and of Inner Mongolia and Mongolia similar natural tourism in Mongolia visited Inner Mongolia, and environments and ethnic cultures, they have the two sides exchanged deeply cooperated views. In natural advantage of developing bilateral tourism. 2014, Inner Mongolia opened a special railway to And Mongolia is also the preferred tourism the Mongolian country for the “Prairie Star” and destination for China. The China-Mongolia Tourism Cooperation Fair was held in Inner Mongolia in 2015. The meeting reached nine tourism cooperation projects covering 154 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 areas such as development of cross-border travel Mongolia Autonomous Region. It is located in the routes, hotel construction, training of tourism south of DaQingShan Mountain in central Inner personnel, and tourism planning. Until to the 2016, Mongolia. It is the strategic crossroads of the China and Mongolia signed The National Tourism Bohai Economic Circle, Western Development, Administration of the People's Republic of China and the Northeast Old Industrial Base that connects and the Mongolian Ministry of Environment, Green the Yellow River Economic Belt, the Eurasian Development and Tourism Tourism Cooperation Continental Bridge, and the Bohai Rim Economy. Agreement[1]. The important bridge of the region is an important border city that China has opened up to Mongolia CONSTRUCTION OF "POLE-AXIS" and Russia. It is also an important aviation hub in COOPERATION MODEL northern China. Besides, it has deep historical and According to the “pole-axis” system theory, cultural connotations, diverse landscapes, and rich and it also includes the spatial distribution tourism resources. It is one of the important tourism characteristics and spatial distribution of tourism distribution centers of the North Upland Grassland, cities, transportation routes and tourism resources the West Desert, the South Yellow River, and the of Inner Mongolia and Mongolia, construct a East Beijing-Tianjin Railway. One of the important spatial cooperation model combining points, axes, tourist centers in Beijing and Tianjin. Ulaanbaatar and surfaces. That aims to optimize the layout of is the capital of Mongolia that is the center of tourism space, promote the improvement of the politics, economy, culture, transportation, industry tourism system, expand the tourism market, and and science and technology of the country. As the promote cooperation in tourism space [9]. end of 2016, the resident population was 1.408 million, of which 70% were young people. It is 3.1 Defining Tourism Development Centers one of the youngest cities in the world and it is at All Levels also an ancient capital with a history of more than Tourism development centers at all levels 370 years. Ulaanbaatar is one of the transport hubs are the core of the agglomeration and diffusion of of China, Russia, and Mongolia. In recent years, tourism development. They have strong radiation under the influence of China’s “One Belt and One effects on the surrounding areas and promote the Road” initiative, the construction of road networks, formation and development of development axes aircraft routes, and railway lines leading to China [11]. Therefore, the establishment of a tourism and Russia have been deepened. They have close development center is very important. The border cooperation with Moscow, Hohhot and Tianjin in between Inner Mongolia and Mongolia has been international transport. The traffic lanes extending developed 30 years, it has been formed excellent from Ulaanbaatar to the north and south not only traffic conditions, strong cross-border economic play a significant role in the economic construction cooperation zone with strong tourist influence and of Mongolia, but also serve as an Asia-Europe natural and cultural tourism resources. Hohhot continent bridge linking China, Mongolia and is the most important tourism distribution center Russia in the "One Belt and One Road" to reach a in Inner Mongolia and the capital Ulaanbaatar is win-win situation and continue to extend. the largest tourist center in Mongolia. In addition, (2) Secondary Development Center: Inner Mongolia's Hulunbeier City, Xing'an League, Wulanchabu city, Erlianhaote, Sailingshanda, Choir Xilin Gol League, Ulan Qab City, Baotou City, and Zongmod. Wulanchabu City is located in the Bayannaoer City and Alxa League and other central part of Inner Mongolia Autonomous Region seven alliances with Mongolia's Eastern Province, that is closed to Beijing and borders on Mongolia East Gobi Province, Sukhbaatar Provincial and in the north. It has a border line of more than 100 South Gobi provinces border the four provinces. kilometers. It does not have a port to Mongolia, And depending on it, identify important tourism and it belongs to the first-class development axis. development centers, they are as follows: It is the “bridgehead” of Inner Mongolia to the (1) Primary Development Center: Hohhot west. The meeting point of North Kainan Union and Ulaanbaatar. Hohhot is the capital of Inner is a transportation hub that enters the three major SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 155 economic circles of the northeast, north, and functions. However, the total mileage, per capita northwest. It is an important international gateway mileage, and unit density of its railways and roads to Mongolia, Russia, and Eastern Europe. It has 19 are very low. There are no expressways in the A-class scenic spots, of which 4A is 6 Departments, country, and 90% of the roads are dirt roads on the 7 in 3A class, 6 in 2A class[12]. Erlianhaote is the grasslands. The construction of basic transportation largest railway and highway port open to Mongolia facilities is relatively backward. Inner Mongolia in China and one of the countrys first 13 open has improved infrastructure such as railways, cities along the border. It is 714km away from highways, and aviation. The north-south transport Ulaanbaatar, 720km from Beijing and 410km away of railways and transportation links lead the way from Hohhot. It is China’s closest to Beijing. The and the total mileage of the highway has reached land ports have already carried out border tourism 199,000 kilometers, and all 12 cities have their own for nearly 30 years and have a 4A class and a 3A airports. class tourist attraction. Saiyin Sanda is the capital (1) First level development axis: the Siberian of Mongolia’s Gobi Province, the fourth largest Railway, starting from Russia Ulan-Ude, which city in Mongolia. It is an important hub city on passes through Ulaanbaatar, the capital of the railway line between Erenhot and Ulaanbaatar, Mongolia and enter into Inner Mongolia Erlianhot. which is surrounded by lakes, monasteries and It is the main artery of Mongolia that total length is other tourist resources. The city of Joyle, the approximately 1110 kilometers in Mongolia. From capital of Mongolia's Gobi Sumubel Province, is a Ulaanbaatar to Hohhot, along the Siberian railway city along the international railway line and has a line, it is determined as the first-class development number of destinations, such as Sansal. Zongmod axis, along which the line also has a higher grade Municipality is the capital of the Central Province road, and there are from Hohhot - Ulaanbaatar, of Mongolia. It is the nearest city to Ulaanbaatar, Erlianhot - Ulaanbaatar International flights. The the capital of the country. It has convenient railway transportation line connects three cities in Inner and highway traffic and is an important hub city in Mongolia and four cities in Mongolia, including the Mongolia. two most important tourism and distribution cities (3) Tertiary development center: Ten Inner of both countries, and China’s largest land port city Mongolia cities, Hulunbeier, Xingan League, for Mongolia. Along the road, the main tourism Chifeng City, Tongliao City, Xilingol League, resources in Central Inner Mongolia and southern Baotou City, Bayannur City, Ordos City, Wuhai Mongolia are gathered, enjoying a high reputation City, Alxa League. The five provincial capitals both at home and abroad. The integration of Inner of Mongolia, Chowbashan (Oriental Province), Mongolia and the Mongolian tourism market has Dharazadyud City (South Gobi Province), West become the main axis of China-Mongolia tourism Ulth (Sukhbaatar Province), Wendul Khan City cooperation and development. In the present, it (Kent Province) ) And Mandal Le Gobi City (Gobi develops rely on this axis; focus on the development Desert Province). The above 15 cities are mainly of distinctive characteristics and great influence located in the secondary axis. at all levels of growth pole. Besides, develop secondary development axes and development 3.2 Define the Axis of Tourism Development nodes to promote the comprehensive development at All Levels of tourism in Inner Mongolia and Mongolia, and It has great significance for promoting regional promote the in-depth cooperation between the two development because of transportation trunk line regions. and corresponding integrated transport corridors (2) Secondary development axis: Hohhot - are the connecting lines of cities, development Baotou - Ordos, Wuhai - Bayannaoer - Alashan, centers, and growth poles [13]. Inner Mongolia and Xilin Gol - Xingan League - Hulunbeier, Chifeng Mongolia are deeply inland and do not have access - Tongliao, Ulaanbaatar - Wendur Khan - Choba, to the sea, so the main transportation are railways, Ulaanbaatar - Mandal Gobi - Dharazada. The highways and aviation. In Mongolia railways ans axis includes four tourist boutique areas in Inner highways have assumed major transportation Mongolia, a city tourist area with historical and 156 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 cultural monuments centered on Hubao city circle, of an open tourism system will open the way for and cultural heritage sites such as Genghis Khan the future integration of tourism industries and Mausoleum, Zhaojun Mausoleum, and Five Pagoda the development of tourism education cooperation Temple. There are 87 A-class scenic spots; in the between the two regions. Besides, it creates national arid desert tourism zone centered on desert tourism, and unique tourism products, and set off an upsurge there are Badan Jilin Desert Scenery, Moon Lake of The Silk Road tourism, increases the influence of Tourist Area and other scenic spots. The desert international regional tourism, and increase tourism covers a wide range and has 22 A-class scenic along the route. The market competitiveness will spots; The Inner Mongolia grassland folk customs promote the deeper cooperation and development of and tourism area where folk custom is the main the economy, trade, and culture in the two regions. content, Hulunbeier grassland, Xilin Gol grassland, Through the analysis of a series of factors and National Forest Park are distributed in this area, including the international and domestic attraction with unique natural scenery, 97 Grade A scenic of the tourism resources in Inner Mongolia and spots, and cultural landscape tourist areas centered Mongolia, the natural environment, the socio- on the ruins of the ruins. The Liao Shangjing economic status, and the national culture, the space Site, Hongshan Culture, the site of the Karawang research is based on the "point-axis" system theory. Nunnery, and the Naiman Palace has a wide range of tourist attractions and boasts 57 Grade A scenic THE SPATIAL STRUCTURE OF spots. The two secondary axes in Mongolia have "AN AXIS, DUAL-NUCLEAR, better road conditions and beautiful natural scenery, SEVEN DISTRICTS" TOURIST and there are temples and other cultural landscapes. COOPERATION IN INNER MONGOLIA AND MONGOLIA 3.3 Conception of Constructing Tourism Under the guidance of “point-axis” system Cooperation Space Based on "Point-Axis" theory, the spatial of tourism cooperation between Theory Inner Mongolia and Mongolia forming a point- The prominence of Mongolia in the south line-surface combination, and the unified spatial and the narrow distribution of the east and west pattern of tourism center cities and tourism routes. in Inner Mongolia have made Inner Mongolia Taking the Hohhot-Ulan Bator railway as the a necessary place to connect Mongolia with axis, combined with the tourism center cities and China’s Jing-Jin-Ji industrial base, the Bohai- secondary development axes along the route and Rim economic circle, and the Northeast industrial radiation range, the tourism cooperation spatial base[1]. Hohhot-Ulaanbaatar railway line is the main structure of “an axis and two nuclear zones” is channel of the historic The Tea Road ceremony formed. and The Silk Road. Mongolia’s “Prairie Road” is “A axis” is the main line of “One Belt and One highly consistent with China’s “The Belt and Road Road” and “Prairie Road” coincidence. It is based Initiative” initiative. The combination of “Two on the railway line connecting Inner Mongolia and Roads” is Economic development in all regions Mongolia. What is more, the Hohhot-Ulaanbaatar along the route provides a good basis. Regions is the first level development axis that Drive along the route can use the branding effect of the secondary center cities, tertiary node cities, and “two routes” of the two countries and take the secondary development axes. Besides, it integrates tourism market as the orientation to achieve multi- tourism resources along the route, digs deeper into regional cooperation in the tourism industry in the the traditional culture of the “Prairie Silk Road” two regions, strengthen the economic and cultural to form a comprehensive natural and humanistic exchanges between Inner Mongolia and Mongolia, tourism corridor such as grassland tourism, cultural and open up the cultural corridor between China tourism, folk custom tourism, experience tourism, and Mongolia to revive “The Silk Road Initiative”. leisure tourism, and self-driving adventure tourism. Integrate the tourism resources within the area concerned and create a harmonious and unified tourism image along the region. The establishment SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 157

Table 1 The "Point-Axis" Development Framework for Inner Mongolia and Mongolia Tourism Centers and Major Traffic Level Development Axis Radiation ranges at all Major Tourism Scenic line Levels Zhaojun Museum, Dazhao Temple, Gegentala Prairie Tourist Hohhot-Ulan First level Hohhot-- Ulan Hohhot - Wulanchabu - Center, Huitengxile Bator Railway, development axis Bator Erenhot Huanghuagou Grassland G110, G208 Tourist Area, National Scenic Spot, Dinosaur Park [14]and etc National Palace, A0101, A0102, Sai Shanda - Joyle - Sukhbaatar Square and A0103 Zommod - Ulan Bator etc Hu Bao E Wudang Temple, Genghis Railway Khan Mausoleum Tourist Line, Wuhai- Area, Xiangshawan Bayannur- Tourist Area, Tenggri Alashan Dalai Moon Lake Desert Railway, Ecological Adventure Xilin Gol- Holiday Camp, Aershan- Hulunbuir, Xinganmeng, Xinganmeng- Chaihe Tourist Area, Secondary Hohhot - Baotou - Chifeng, Tongliao, Xilin Hulunbuir Sino-Russian Mutual Development Axis Ordos Gol, Baotou, Bayannur, Railway, Trade Area, Russian Ordos, Wuhai, Alashan Chifeng- Matryoshka Square, Tongliao Keshiketeng World Railway, G110, Geological Park Ashhutu G7, G45, G111, Granite Stone Forest S218, S312, View, Daqinggou S303, S307 and National Nature Reserve etc and etc. Wuhai- Bayannur -

Alashan Xilin Gol - Xinganmeng - Hulunbuir Chifeng - Tongliao Chowba Mountain (Eastern Province), Dalanzada (SouthGobi Choba Mountain, Ulan Bator - A0501, A0502, Province), West City Erdene’s Awakening Wendall Khan - A0201, A0202 (Sukhbaatar Province), Temple, Gobi Desert and Choba Mountain Wendallhan City (Kent etc Province)and Mandalay City (Gobi Province) Ulan Bator-- Mandalep Gobi -- Darlan Zadad

“Dual Core” is a core tourism center city drives the development of tourism in the cities of with Hohhot and Ulan Bator as first-tier cities, the three-tiered nodes, Hohhot and Ulaanbaatar, and Wulanchabu, Erlianhaote, Sai’anshanda, Joyle Inner Mongolia, and important tourist centers in and Zong Mode are the second-tier tourism center Mongolia. Besides, compared with other cities in cities along the way. Radiation along the way Inner Mongolia and Mongolia, the two cities have 158 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 rich tourism resources, a relatively mature tourism scenery with national culture and adventure tourism. industry, and a good development environment. Fourth, Fourth, the grassland, forest, ice and snow Moreover, they can rely on the second and third- resources tourist areas, with Hulunbeier, Xing'an tier tourism cities to integrate its unique tourism League and Xilinguole League as the tourism center resources, can promote the development of cities, the area has vast grasslands, dense forests, the overall tourism industry in Inner Mongolia numerous hot springs, unique folk culture and and Mongolia, promote the cooperation and winter ice and snow. It belongs to the region with development of tourism products in all aspects, and huge potential for tourism development and strong promote the further development of the tourism attraction in Inner Mongolia. Fifth, the cultural industry. tourism area where long-standing civilizations and “Seven Districts” is based on the “pole axis” heritage sites coexist takes Chifeng and Tongliao system theory and combines the tourism resource as the tourism center cities. This area has a long types of Inner Mongolia and Mongolia. In addition history of Hongshan culture, unique geological it divides the tourism cooperation in Inner Mongolia relics, and a cultural tourism area with a strong and Mongolia into seven major tourist areas. First historical atmosphere. Sixth, the cultural tourism of all, the Prairie Silk Road cross-border tourism area that combines the integration of the west and area, with Hohhot and Ulan Bator as the core the west of Mengxi, with Ulaanbaatar, Wendur tourism center cities, connects Ulanqab, Erenhot, Khan, and Qiaobashan as the tourism center cities. Saiyinshanda, Choyil and Zongmod, along the The area has famous historical cities, ancient Silk Road to strengthen the city’s infrastructure temple buildings and grasslands in Mongolia. construction along the way. Secondly, civilized Natural resources such as lakes and lakes are the historic sites and historical sites in the urban main traffic routes in the eastern part of Mongolia. tourist areas, with Hohhot, Baotou and Ordos as The city of Chobbashan is a trade center in the the tourism center cities, the area combines many eastern part of Mongolia. Seventh, the Gobi Desert historical sites, historic sites, urban customs, folk Natural Scenery Tourist Area is a tourist center city culture and other tourism resources, with strong with Zongmud, Mandalep Gobi and Dharazada tourism Reception capacity and tourist attraction. Djude as one of the largest deserts in the world, the Thirdly, Desert Scenery Adventure Tourism Zone, Gobi desert, which are historically Mongolia and an with Wuhai, Bayannaoer and Alxa League as the important part of the empire. As shown in Figure 1. tourism center cities, combines the desolate desert

Figure 1 Spatial Structure of "An Axis, Dual-nuclear, Seven Districts" Tourism Cooperation between Inner Mongolia and Mongolia SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 159

REFERENCES [8]Liu Y. Zhang M Y. Discussion on the Construction of China-Myanmar Cross- [1] Wang S, Jinkai L I. Countermeasures for border Tourism Cooperative Development tourism cooperation between Mongolia Model [J].Inquiry into Economic and Inner Mongolia based on the PEST- Issues,2014(06):127-131. SWOT analysis[J]. Journal of Arid Land [9]Yu F M. Chen J H. Kong L. Bi G Y. Resources & Environment, 2017. Liu X L. Research on tourism resource [2]Zhang X J. Mongolia Tourism Market [J]. development along China-Iran railway Russia Central Asian & East European based on the Pole-Axis theory [J]. Market, 2007(6):42-46. Geography and Geo-Information [3]Sai N, Hu W, Gu Z J. Research on Science,2016,32(05):115-120. Mongolia's Tourism Development [10]Li D. Ya-nan You. Zhang Wen-zhong. Strategy - Based on the Intention Survey Wu J.Spatial distribution of tourism of Chinese Tourists Traveling to Mongolia corridor and development system in the [J].Shaanxi Journal of Agricultural China-Kazakhstan border area[J]. Journal Sciences, 2011,57(04):240-242. of Arid Land Resources & Environment, [4] Sun G, Jingmei A N. An analysis of the 2017 interaction relation of tourist and trade [11] Cheng X L, Zhu Y W. Tourism Spatial between Mongolia and Inner Mongolia of Structure of South Anhui International China[J]. Journal of Arid Land Resources Tourism and Culture Demonstration Zone & Environment, 2014. Based on the Framework of Point Axis [5]Zhang X J. China-Mongolia Tourism Theory[J]. Scientia Geographica Sinica, Cooperation and Development Strategy 2013, 33(9):1082-1088. [J]. Russia Central Asian & East European [12]Zheng H, Zhao Y F. Coupling Relationship Market,2011,(6):32-36; between Urbanization and Social Economy [6] Liu L M. On China-Mongolia-Russia in Inner Mongolia - A Case Study of Tourism Cooperation and Development Wulanchabu City [J].Journal of Jining Strategy[J]. Journal of Inner Mongolia Normal University,2017,39(03):53-56. University of Finance & Economics, 2016. [13]Cui G H. Wei Q Q. Chen Z X. Regional [7] Lu D. Formation and dynamics of the Analysis and Planning [M].2005 "Pole-Axis" spatial system[J]. Scientia [14] Inner Mongolian Travel Statistics Flight Geographica Sinica, 2002, 22(1). [Z]. Inner Mongolia Authority Travel Agency,2015. 160 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

ANALYSIS ON THE PERFORMANCE EVALUATION OF CHINA’S ‘RETURNING GRAZING-GROWING’ POLICY---TAKE ORDOS INNER MONGOLIA FOR EXAMPLE

Wei Li Si Inner Mongolia University of Finance and Economics

Abstract: This paper introduce using AHP multi-objective Decision analysis method to establishes a comprehensive performance evaluation system of grazing-grassland project by the software YAAHP to assign value to each index, and through a series of calculation of the weight Table of processing index, to achieve a standardized and scientific data processing of relevant indicators, The results of data index and performance evaluation demonstrate that research area ecological environment improved and the performance evaluation of Returning Grazing-Growing’ policy is well after the implementation.

Key Words: public policy performance evaluation, ecological compensation policy, sustainable development, ecological civilization

INTRODUCTION area, after a decade grassland degradation area From 1999 to the present, China government of 20%, to the mid-1990s already accounted for issued and implemented the public policy China’s grassland area of 30%, to 2004, grassland of returning grazing to pasture is not only a degradation area unprecedented conquest of the magnificent project in the ecological construction, total grassland area of 50%,and is deteriorating at a but also a kind of important measures to promote rate of 2 million hectares per year. The reason why the development strategy of the west area of China. grassland degeneration area is swift and violent is The implementation of the policy will not only not a day, and the natural factors such as global protect and improve the ecological environment of warming, flood disaster and pest infestation are the the western region, but also lead the western region main culprits of grassland ecosystem deterioration, to poverty, sustainable development of important but human factors are the most important cause of strategic new ideas. grassland degeneration. On the study of returning grazing and grassland, In 1999, Pre-Minister Zhu Rong ji pointed in recent years, it has not been as much attention as out that it was necessary to take the measures of the beginning of the western development, however, returning grazing and grassland, the State Council at present, the decision-making level of the policy on the further improvement of the pastoral and implementation process of returning grazing and grassland trial of a number of views published in grassland, such as the public policy performance September the following year, said: “The relevant evaluation of ecological and compensation system regions have been based on the deployment of the design issues can become the academic and the State Council of China to actively carry out the government must pay more attention to the serious pilot work of grazing, the progress of the overall problem, The scientific rationalization and proper relatively smooth.” In order to be more clear about solution of such topics will greatly affect the their responsibilities, strengthen management, effective allocation of resources, the economic and actively promote the healthy development benefits of agricultural herdsmen, the conservation of the pilot work, according to the Chinese State of grazing fruits, project development, grazing Council manager of the Office of the Meeting held and pasture, economic high quality, sustainable a number of discussions, and after the July 2000 development and other goals. western Region Retreat Grazing Work Symposium, According to the Grassland Resources The following 5 provisions were made in the pilot survey, China the 1970s grassland degradation work of returning grazing and grassland: strengthen area accounted for 10% of the total grassland leadership, clear responsibility, implement SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 161 provincial government’s total responsibility, protecting the environment, treating the ecological improve the policy of returning grazing and environment as the same as life, and coordinating grassland, fully mobilize the enthusiasm of the the management of the landscape system of Lake masses, and rely on scientific and technological grass, The implementation of the most stringent progress to rationally determine the planting eco-environmental protection system, the formation structure and vegetation restoration of forest and of green development mode and way of life, firmly grass. Strengthen construction management to take the production and development, rich living, ensure the development of grazing and grassland, ecological good civilization development road, the strict inspection and supervision to ensure the construction of beautiful China, for the people to quality of the project. August 22, 2011, China’s state create a good living environment for the global Ministry of Finance, the Ministry of Agriculture ecological security to contribute. and the NDRC issued the “on the improvement of the return of grazing and grassland policy” notice, THE SPECIFIC IMPLEMENTATION this is the important measure to improve the policy OF ECOLOGICAL COMPENSATION of returning cropland to grassland after the country POLICY IN CHINA implements the ecological protection subsidy In particular, the current compensatory policy system. is mainly aimed at the conversion of farmland The policy of “returning grazing and returning to forests, grazing and grassland policy, forest to pasture” and the demand of China’s western resources Protection, three North Shelterbelt development and sustainable development are of construction, Beijing-Tianjin Sandstorm source great vitality, and the leaders of the CPC Central control and water resources management, such as Committee and China government propose to large-scale regional ecological projects. change the Advocating land reclamation, promoting cultivation and war culture, taking grain as the Conversion of cropland to forest project discipline and rewarding the cultivated felling The Administration Department of our as, Change to forest and grassland to protect the country has designed the system of returning ecology, for the initiative of returning farmland farmland to forest in the next 10 years, which to pasture farmers herdsmen economic subsidies involves 22 provinces and cities, 5.3 million hm2 and incentives, can be called a major turning cultivated land, helps to afforestation 8 million point in policy making since the founding of the hm2, and effectively protects 36 million hm2 soil China, is an actively promote local development and water area, the effective control area of wind- of important decisions. From the point of view of sand fixation is up to 70 million hm2. And in 2002, the national ecological security, it is the aim of the State Council promulgated the “method of policy implementation to improve the outlook of returning farmland to forests”, the design of the backwardness and poverty in the western region, project to return farmland to forest and the scope and to create a good harvest of beautiful mountains of the content made detailed requirements. The and rivers and the people of the new West. Today, compensation included in the project of returning the policy of returning cropland to grassland has farmland to forestry is mainly aimed at the local been in operation for a long time, which is worth farmers as well as the government, which provides investigating and investigating the economic free food, seed and most of the production and development and the influence on herdsmen’s life maintenance fees for the farmers in accordance with in the policy implementation area. the national policy, and has taken special financial The report of the 19th National Congress of the compensation for the economic losses suffered by Communist Party of China noted that the construction the local government for the implementation of the of ecological civilization is the Millennium plan for policy of the sustainable development of the Chinese nation. must establish and practice the idea of Green Grazing and Grassland project Mountain is Golden and silver mountain, adhere to In 2002, the State Council formally the basic State policy of conserving resources and implemented the 11 provinces and cities in the 162 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 western region of the retreat grazing and grassland ECOLOGICAL COMPENSATION project, since 2003, it takes five years to rescue POLICY FORM OF RETURNING the degraded grassland in Inner Mongolia, Gansu, GRAZING AND GRASSLAND IN Xinjiang, Qinghai and Tibet region, and focus on 67 CHINA million HM2 (1 billion mu). The grazing pasture, Generally, the policy compensation system which occupies 40% of the area of the degraded implemented in China is usually compensated by grassland, strictly restricts the work of animal four kinds of compensation methods, such as the husbandry during the period of the implementation corresponding convenience policy, funds, material of the grazing and grassland project and grants the or intelligence. food and fodder for the damaged herdsmen. 3.1 Policy compensatory Natural forest protection Project Policy compensation refers to the power The natural forest Protection project is to and opportunity compensation of the Central carry out classified management to the forest farm: Administrative Department for the subordinate divide the main forest area into the key ecological regional administrative departments. Regional protection forest, the general ecological protection governments that are compensated by policy Forest and the commercial forest area, carry on the can exercise appropriate policy priorities and strict protection to the key ecological protection preferences within the right areas of authority. forest, after the construction of commercial forest This kind of policy compensation system is very area to maintain the According to the design of practical in some poor areas where the economic natural forest protection project, strict control is situation is relatively backward. carried out against the middle and upper reaches 3.2 Fund compensation is the most of the Yangtze River and the upper reaches of frequent and direct compensation method. the Yellow River with 70 million hm2 of natural Financial compensation can be divided into forests. At the same time, the forestry construction policy compensation, special funds, reduce tax on the Yangtze River and the upper reaches of the liability, refund tax, provide additional credit, Yellow River is strengthened, and the former barren financial subsidies and so on. For the agricultural hills and wastelands are planted and greening. In production in the impoverished areas of western the implementation of the project, a total of 8.66 China, which is implemented by the policy of million afforestation hm2, so that the Yangtze returning grazing and grassland, only the individual River and the upper reaches of the Yellow River interests are safeguarded, so that the policy can in the forest coverage from the previous 17. 5% to be conscientiously implemented and the regional 21.24%. ecological construction can get the remarkable effect. The Green Great Wall 3.3 Real compensation in kind is to The Green Great Wall project refers to the compensate for the loss of the material, labor northwest-north-northeast China networks of resources and production tillage due to the policy shelterbelts.The program is mainly carried out in the implementation, to solve the interests of the injured eco-fragile areas of northeast, north and northwest and to improve their economic situation. In China’s China, according to the project area calculation, the retreat grazing and grassland policy on the use of scope of the project is related to half Chinese. The food for ecological content. construction of the three North Shelterbelt system 3.4 The intellectual compensation is for the was 73, and the construction area of the three North compensating person to carry on the intelligence Shelterbelt system reached 4.06 million km2, service, provides the advisory guidance service which is the most extensive ecological construction to its production work, enhances the policy project in the world at present. implementation area production work technical content, trains each kind of technical talented person, strengthens the policy implementation area productivity, the technical content and SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 163 the management organization level. Since the taking 8 flags as the statistic units, from the total implementation of the eco-governance policy will area of forest resources, the rate of cover, the shift a large amount of labor to other industries in structure of tree species and ownership structure, the industrial sector or in the agricultural sector, According to the deployment of the relevant national workers need to improve their quality skills to adapt ministries, combined with the national Grassland to new changes. ecological Construction and conservation plan, the administrative measures for the pilot project of the THE POLICY PERFORMANCE Inner Mongolia Autonomous Region of the pasture EVALUATION ‘RETURNING and grassland (trial) and the actual situation of the GRAZING-GROWING’ POLICY IN Inner Mongolia Autonomous Region, The project Ordos, Inner Mongolia Autonomous Region, implementation plan of the natural grassland grazing located in the southwest of Inner Mongolia and grassland in Inner Mongolia was compiled. Autonomous Region, the jurisdiction of the seven Using AHP decision analysis method, can flags, the city’s public budget revenue of 35.68 determine the weight of evaluation indicators, first billion yuan, the same caliber growth of 5.1%. of all, invited a number of experts to form a team Among them, tax revenue of 28.99 billion yuan, of experts, according to the scale of table 4-1 of accounting for the public budget income 81.3%, the first level of indicators to fill out the judgment non-tax income of 6.7 billion yuan, accounting for matrix, each expert out a copy. The total was given the public budget income of 18.8%. The city’s public a 15-point judgment matrix. budget expenditure of 47.71 billion yuan, down 15.1% year-on-year. (the data due before2017.12). Calculate the weight and consistency test of The total area of 86752 square kilometers, evaluation index the region rich in natural resources, topography This paper takes matrix A as an example to and topography complex, rapid economic explain in detail. development of rich and poor gap, in the past due 1. Each row of elements in matrix A is to overexploitation of mineral resources, the pursuit multiplied and opened the second party, of economic benefits of mining moss, licorice, 2. Calculate the weight: Using the above lock Yang and other Chinese herbal medicines, method to obtain the matrix d=5.0683, the Yellow River burst floods and sandstorms CI=0.0171, By looking at the table, RI=1.12, and man-made causes Farmers and herdsmen are substitution (3.6), CR=0.0153<0.1, Can more accustomed to extensive business model, the pass the test, at this time the weight is: relatively weak sense of environmental protection [0.2278, 0.5059, 0.1357, 0.0836, 0.0469], leads to deforestation and overgrazing of the We can calculate the weight coefficients situation is very serious. of the first level index x and the second In 2015, the Ordos Forestry Bureau takes level index Y. Ordos Forest resources as the research object, 164 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Table 1 Performance Evaluation Index of grazing and grassland policy Evaluation index First level evaluation index Second level evaluation index Y1 Afforestation survival rate Y2 Rate of afforestation area of cultivated land Y3 Conservation rate of the project area of Policy returning grazing and grassland XI The degree of completion of performance Y4 Qualification rate of replanting and replanting the work of returning grazing and Evaluation index of of pasture grassland the grassland Y5 Grazing ban Y6 Forest Care Index Y7 Per capita afforestation area index Y8 Proportion of ecological forest area Y1 Forest cover rate X2 Ecological control effect of Y2 Vegetation cover change rate returning grazing and grassland Y3 grassland quality change number Y4 Natural Disaster Change Index Y1 Fiscal revenue growth rate Y2 Changes in Total Income of Farmers and Herdsmen Before and After Retiring Y3 Changes in Family Farming and Animal Husbandry Income Before and After Cultivating Y4 Before and after the return of farmland, family K changes his economic income Y5 Retirement Assistance as a percentage of X3 Economic benefits of household income returning livestock to grassland Y6 Non-agricultural income as a percentage of household income Y7 Ratio of Area Ratio of Food Crops Y8 Economic crop area ratio change rate Y9 other crops by the proportion of change in the proportion of product Y10 cattle slaughter rate of change Y11Change rate of sheep’s decay number Y12 Change in the number of pigs slaughtered Y1 Food security supply Y2 Outgoing labor service ratio Y3 Returned farmer family household consumption X4 The social benefits of index returning livestock to grassland Y4 farmer households medical change indicator Y5 Resettlement households living conditions change index Y6 farmers’ ecological awareness changes Y1 farmers’ understanding of the policy X5 Farmers’ policy on returning Y2 farmer’s interest in current compensation Policy farmland standards performance Satisfaction level Y3 farmers’ satisfaction with the compensation Y4 退耕的怠愿 Y1 Farmers’ Evaluation of the Government’s Work on Distribution of Returning Grazing to X6 Retreat farmer households to Grassland Evaluation index the government Y2 Farmers’ evaluation of grants Evaluation of work Y3 Farmers’ Evaluation of Acceptance of the Government’s Apricot Inspection SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 165

4.2 Result of evaluation performance evaluation value from 0.0000-1.0000 into five This article mainly adopts the analytic levels, detailed indicators and meaning. hierarchy process to analyze the index in table 1, From the evaluation conclusion, the evaluation at the same time determines the weight, and then index of grazing returning to grassland in Ordos according to the research to obtain various indicators City was 0.6015, and it just entered a good area, of the numerical average, the final score. Adopt indicating that its grazing returning to grassland analytic Hierarchy process to establish model. In work had achieved some results, and the policy had order to more directly reflect the effectiveness of a good performance. grazing grassland, can be returned to pasture effect

Table 2 Effect Evaluation Index registration form of grazing return Evaluation Index 0.0000-0.2000 0.2001-0.4000 0.4000-0.6000 0.6001-0.8000 0.8001-1.0000

Rating 1 2 3 4 5

meaning Very poor Poor General Good Excellent

CONCLUSION DISCUSSION idea of sacrificing the environment at the cost of With the improvement of water and soil economic development have also undergone major erosion, the frequency of disaster climates in changes. the project area has been greatly reduced. Wild The report of the 19th National Congress animals that have not appeared for many years of the Communist Party of China noted that have reappeared, and the number of wild animals the construction of ecological civilization has also increased year by year. The functions of is the Millennium plan for the sustainable climate regulation, conservation of soil and water, development of the Chinese nation. must and purification of air in forest land have been establish and practice the idea of Green strengthened. At the same time in the construction Mountain is Golden and silver mountain, adhere of the project, according to the different regional to the basic State policy of conserving resources climate and resource conditions. The secondary and and protecting the environment, treating the tertiary industries of forestry and animal husbandry ecological environment as the same as life, and have been continuously established. After years of coordinating the management of the landscape efforts, during the “10th Five-Year Plan” period, system of Lake grass, The implementation according to the data provided by the Central of the most stringent eco-environmental United Front Work Department Information Center protection system, the formation of green of the Chinese Communist Party, the city’s forest development mode and way of life, firmly take coverage rate has reached more than 20%. Peoples the production and development, rich living, have obtained good economic returns from them and ecological good civilization development road, achieved a win-win result of ecological benefits and the construction of beautiful China, for the economic benefits. With the effective adjustment people to create a good living environment for of the local industrial structure, the peasants and the global ecological security to contribute. herdsmen’s life and production methods and the 166 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

A REVIEW OF RESEARCH ON AGRICULTURAL CARBON EMISSIONS

Li Jie

BACKGROUND Since entering the industrialized society, various kinds of climate problems have been constantly highlighted due to the excessive interference of human beings in nature. It brings about extreme weather, sea level rise, haze weather, tundra thawing, soil erosion and other natural disasters seriously affecting the normal life of human beings (IPCC, 2007). Carbon emission is the result of human improper activities and is a general term of greenhouse gas emission. Since the end of 1970s, with the deepening of human understanding of environmental problems, the academic community has carried out various discussions on environmental problems. With the pace of reform and opening up, China has realized high speed development and gradually become one of the largest carbon emission countries in the world. Since the 18th national congress of the communist party of China (CPC), China has for the first time raised the issue of ecological environment to a prominent position in the construction of civilization. It makes the building of a beautiful China as the goal of building a modern and powerful country, vigorously promoting the construction of China’s ecological civilization, developing a low-carbon and green industrial model, and prohibiting the damage to the ecological environment caused by all kinds of production activities at the root. China’s carbon emission is expected to peak around 2030, according to the 2014 “Sino-us joint statement on climate change” issued by China and the United States. In 2015, President xi jinping, in his appearance at the Paris climate conference, said that in 2030, China’s carbon emission intensity will be reduced to 35% - 40% of 2005, which means that every industry has to work for the reduction of carbon emission, including agriculture department. In the outline of the 13th five-year plan formulated by the Chinese government in 2016, it was also clearly proposed to fight the environmental war on “atmosphere, water and soil”, indicating China’s positive attitude towards environmental issues. Agriculture is a dual sector of carbon source and carbon sink, but due to the improper intervention of human activities, it is difficult to achieve the proper balance between carbon emission and carbon absorption in the natural process. In the process of agricultural production, countries in the world only obtain sufficient agricultural output. To a certain extent, they rely on the extensive use of various inputs and the excessive use of various natural resources. For example occupying nearly 40% to 50% of the agricultural land in the world, which is the main emission source of global greenhouse gas CO2, CH4 and N2O (Jane etal, 2007). This high-carbon agricultural production model makes the greenhouse gas produced by the agricultural system the second largest emission source in the world (IPCC, 2007). Therefore, it is necessary to research on identifying the source of agricultural carbon emission, the factors influencing agricultural carbon emission, the carbon emission status of different types of agriculture, the agricultural carbon emission structure of different regions and relevant policies and measures to reduce agricultural carbon emission. Domestic and foreign scholars have discussed various problems of agricultural carbon emissions in many aspects. This paper aims to review and summarize the existing literature on agricultural carbon emission. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 167

seven aspects, including straw burning, agricultural CARBON EMISSION GENERATION fertilizer investment and agricultural irrigation, MECHANISM AND CALCULATION and analyzed the differences of carbon emissions As for the explanation of agricultural carbon between different regions of China. Tian yun emission sources, it was clearly explained in annex (2017) divided the carbon emission sources into A of the “Kyoto protocol” signed jointly by 84 three categories: agricultural material input, rice countries in 1997, pointing out that agricultural production and livestock activities, which resulted carbon emission sources include animal intestinal in various types of agricultural carbon emissions. fermentation and fecal management, agricultural It was concluded that the total carbon emission soil, rice cultivation, and disposal of agricultural increasing, especially the proportion of agricultural residues. In 2008, “agriculture and greenhouse gas materials was increasing, while the other two types emission” published by the United Nations food were in a declining trend. Due to the diversity of and agriculture organization (FAO) shows that the carbon sources, it is difficult to compare the results top five greenhouse gas emissions of agriculture of many studies, and some conclusions may be are soil (38%, CH4+NO2), ruminant intestinal reversed due to different indicators selected. fermentation (32%, CH4), rice cultivation (12%, With the deepening of the study, researchers CH4), biomass burning (11%, CH4+NO2) and in various countries have gradually narrowed livestock excrement (7%, CH4+NO2). With the down a wide range of agricultural carbon rapid development of agriculture, the investment emission sources, and focused on the specific of various chemicals and the use of mechanical agricultural carbon emission subjects and certain fuel have led to the increasing carbon emission of carbon emission forms. Smith (2010) explored agriculture, making agriculture an important carbon the impact of different types of land use modes emission source. on the emission of problematic gases by studying First of all, from the macro perspective the changes of land use in the UK. Sahai (2011) of agricultural carbon emission sources, as the calculated the greenhouse gas emissions generated agricultural production process is a complex system by burning straw in developing countries such as and the sources are diverse, different scholars India, and believed that the disposal of agricultural have different divisions in the determination and residues should be optimized. Galford (2011) took research of carbon sources. American scientist mato grosso state of Brazil as the research object, JaneM.F.Johnson (2007) determined that agricultural combined with historical data analysis, analyzed greenhouse gases were mainly caused by the and calculated its agricultural land use change to burning of fossil fuels and agricultural substances, obtain carbon emissions. Akbolat (2014) took deforestation, animal intestinal fermentation and three different crops: apple, rose and cherry as excrement by measuring three types of greenhouse the research objects, and from the perspective of gases in agriculture respectively. The Environmental energy, analyzed the carbon dioxide emissions Protection Agency of the United States concluded generated by the three crops during planting. Peter that in 2008, for the agricultural carbon emissions (2016) compared and analyzed two wheat crops from the United States of America, the main in Germany and two peach orchard crops in Italy, source of agricultural carbon emissions is that the and used carbon footprint analysis to calculate gas emissions from ruminants and the agricultural agricultural carbon emissions. Peter (2017) also used land related activities, in particular agricultural the carbon footprint method to calculate agricultural land, which brings about a lot of greenhouse gas carbon emissions, but the calculation took into production, through measurements of six aspects. account soil conditions, management methods Li bo et al. (2011) calculated China’s agricultural and characteristics of crop cultivation, making carbon emissions from 1993 to 2008 based on six the calculation more accurate and comprehensive. carbon sources, including pesticides, fertilizers and Czubaszek and Robert (2018) calculated the carbon soil tillage, and summarized four different stages. dioxide emissions of agricultural land that using In 2013, liu huajun (2013) used China’s 1993-2010 digestive juice from biogas digester fermentation. provincial data to calculate the carbon sources from For different forms of agricultural carbon 168 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 emission, Mosier (1998) indicated that CH4 ACTS as a form of agricultural carbon emission, which The carbon emission coefficient method is mainly two types of activities: one is the large is an indirect measurement constructed by the number of CH4 gas emissions caused by its root intergovernmental panel on climate change (IPCC) activities during the cultivation of rice, and the in United Nations. The basic calculation equation is: other is the fermentation motion from the intestinal E = AD * EF, which is the greenhouse gas emission tract of ruminants and its excrement. CH4 is = some type of activity that produces carbon produced in rice field because methane bacteria emissions * the coefficient of the quantification of is in anaerobic environment in rice field, and uses a certain activity, and the coefficient factor for the organic matter in the root to convert it, and the quantitative activity in the actual application process amount of CH4-oxidizing bacteria is eliminated. is adjusted according to the respective research The amount of methane between rice fields is object and characteristics. The field measurement affected by a variety of factors, including climate, method determines the emission of greenhouse soil environment, fertilization and dosage, and gases by setting up observation stations, using flow irrigation method, etc. (Reicosky,2000). Wassmann velocity and other methods, and combining with the R, 2000). The amount of methane produced by concentration of a certain gas to be measured in the another kind of livestock is subjected to feeding, air. Because this method requires a large amount of fecal treatment and climate (oenema. O, 2006). The manpower and material resources, it is difficult for Chinese researcher concluded that the study on the researchers to measure it alone, so it is seldom used. carbon emission of livestock has reached the same The more widely used method is carbon conclusion that ruminant cultivation is an important footprint determination method, and the practical source of agricultural carbon emission, and the application has many detailed branch of calculating maximum emmision of CH4 of the yellow cattle is methods, such as Life Cycle Assessment method found by using the calculation of the greenhouse (Life Cycle Assessment, LCA), Input and gas emissions of livestock in various provinces Output method (Input - Output Assessment) and of China from 2000 to 2007. (dong minghong, li comprehensive analysis method. shengli, 2010, hu xiangdong, etc., 2010) Life Cycle Assessment (LCA) is a Another major form of agricultural carbon comprehensive, top-down evaluation method. emission is CO2 gas. Smith.P (2004) pointed out It is first originating in a technology and method that the form of agricultural carbon emission CO2 developed by the US research institute for the mainly comes from the action of various agricultural environmental impact of coke packaging materials machinery and the use of chemical substances from production to final waste treatment. It is such as fertilizers. Li guozhi (2010) calculated the particularly applicable to carbon tracking and carbon emission of China’s agricultural energy research in a specific industry due to its detailed materials from 1981 to 2007, and concluded that the analysis and thorough tracking. For example, CO2 emission gradually increased but the carbon Troels Kristensen (2015) has calculated the carbon emission intensity decreased. footprint of the Danish cheese industry, which has It can be seen that the sources and been adopted by Peter (2017) for energy crops, measurement of agricultural carbon emissions are while the use of this method is also favored by the becoming more and more accurate and refined. agriculturists as they study microcosmic subjects From the initial source determination to the form of such as sudden crop growth. However, this method agricultural carbon emissions or carbon emissions is not suitable for macro-level investigation and under a certain factor or condition through control comparative analysis between different industries. variables in recent years, there are changes in Input-output method (Input - Output various measurement methods in this process. Assessment) first developed in the 1930 s, was The methods for measuring carbon emissions are created by Wassily w. eontisf in US, and is a kind generally divided into carbon emission coefficient of measurement model applied to the analysis method (ECM), field measurement method and of economic problems. Through measuring the carbon footprint research method. inputs in the process of production, production is SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 169 calculated. This method can be used for theoretical improvement of technology increased carbon estimation of intangible objects that are difficult to emissions, but it can reduce the carbon emission accurately measure, and for system or production intensity, in which the emission reduction effect process with definite boundary, which is more The most obvious is the improvement of the quality suitable for macro analysis. However, this method of the workforce. Li Kongqing (2018) estimated the does not take into account the differences between carbon emission used the STIRPAT model to build different production environments or production the relationship between economic development, conditions. technological progress, and agricultural carbon The comprehensive analysis method is to emissions and calculated the carbon emission in combine the above two methods for analysis. Jiangsu Province from 2000 to 2015. The results Because the research perspective is different from show that the urbanization rate, the rural population the research object, it will bring a great amount of and the technological progress that the number of work in practical application, which needs to be scientists included can making a significant impact further improved. Agricultural economic development is also an impact on carbon emissions. Li Zhiguo et al. (2010) INFLUENCE FACTORS OF used LMDI to analyze the influencing factors of AGRICULTURAL CARBON China’s agricultural carbon emissions from 1981 EMISSIONS to 2007 and concluded that the most important The research methods of the influencing factor causing carbon emissions from agriculture factors mainly adopt LMDI (Logarithmic Mean is economic growth. Using a revision on the basis Divisia Index) model, Kaya identity, Divisia index of Kaya, Li Bo (2011) analyzed the three factors analysis method, or construct various models to that agricultural production efficiency, structure decompose the diverse influencing factors. The and labor force having a certain inhibitory effect Japanese professor Yoichi Kaya (1989) constructed on agricultural carbon emissions, while agricultural an identity which using the four factors of economic development improves agricultural population, per capita GDP, energy composition and carbon emissions. energy utilization to analyze the impact of carbon As for the various activities in crop cultivation, emissions. It is clearly defined the factor-driven lal (2004) estimated the effects of conventional effect. This research method was acknowledged by tillage, intensive cropping, and less no-tillage on the later generations. Based on different research carbon emissions from agriculture. The results methods, various scholars have studied the factors confirmed that the no-tillage were the lowest that affect agricultural carbon emissions. influenced on carbon emission. Bruvoll (2003) believes that with the rapid Mohamad, Ramez Saeid (2016) focused economic development, the input of various energy different agricultural practice’s impact on organic sources continuous increasing which is the main and conventional olive systems using the life cause of carbon emission, while technological cycle method and concluded that the carbon progress can reduce it. Also researching the emissions from fertilizing activities account for same the impact, Gerlagh (2007) analyzed the 80% of organic systems and 45% of conventional impact of agricultural technology on agricultural systems. In contrast, organic systems soil carbon carbon emissions through the use of endogenous sequestration is higher than conventional planting. technological advancement models. The results There are many other factors that affect show that the development of technological agricultural carbon emissions. For example, advances can reduce the costs that aiming to decline Vleeshouwers, LM (2002) established a model the carbon emission, in other words, it can increase to study the UK’s crop, climate and soil conditions the benefits of carbon emission’s reduction. Yang on the status of agricultural land carbon, and the Hao (2013) used the generalized matrix method results show that the interaction of the three factors and the dynamic panel data model to study the influenced effectiveness of the mitigation measures impact of agricultural technology on agricultural of carbon dioxide in different region.Rochette, P carbon emissions. The results showed that the (2004) studied the effect of pig manure on crop 170 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 carbon dioxide emissions in spring and autumn are: the promotion of carbon emission reduction in Québec and concluded that fertilization time technology, the formulation of relevant laws and cannot be generalized and that crop, time, and soil regulations, the adoption of various economic interactions must be fully considered. . means to encourage carbon emission reduction, Yao Yanting (2010) using the grey correlation the policy formulation is more used by economic analysis method, found that the agricultural incentives, such as the collection of carbon tax or machinery, the amount of diesel for agricultural emission reduction subsidized. (Pretty.J, 2001; use, and the amount of fertilizer used were the main Murray B C, 2009). causes of agricultural greenhouse gas emissions. From the perspective of taxation, Delbeke Liu Lihui (2015) combined China’s actual (1994) has a total of six models for carbon tax conditions, for the first time adding urbanization policies from an international perspective, which factors to the LMDI model, and analyzed the status is defined according to the degree of international of agricultural carbon emissions in Guangdong coordination and the role they play. For example, Province, and concluded that urbanization is an Mark Peters (2010) predicts the effect of the important influencing factor. Wu Xianrong (2017), agricultural carbon tax levy and the $14 for based on Kaya, used the Divisia index analysis agricultural carbon emissions, which can make method to classify the influencing factors into two the US to reduce carbon emissions in 2010 by categories and five major effects, and analyzes the 7% compared with 1990.In addition to the tax on growth-driven and emission-reduction decoupling agricultural carbon emissions, Shortle (1997) and characteristics of 31 provinces across the country. Barry Ryan (1998) studied agricultural inputs, As the complex diversity of agriculture, there agricultural energy utilization and agricultural are so many and complex factors that affect the waste respectively. The results proved that the carbon emissions from agriculture. Therefore, it input of inputs would be controlled, the efficiency needs to be analyzed and discussed in depth so that of agricultural energy utilization and the emission can continuously improved. of pollutants were reduced. The study of China’s Dongting Lake by Ping An (2006) found that the RESEARCH ON THE MECHANISM imposition of nitrogenous fertilizer tax on regional AND POLICY OF AGRICULTURAL environment will outweigh the disadvantages. Xie CARBON EMISSION REDUCTION Shujuan (2010) advocated the establishment of In order to reduce agricultural carbon emission a system of paid use of environmental resources, and alleviate the pressure from greenhouse gases levying environmental taxes and promoting carbon on the environment, all of countries’ governments emissions trading. and organizations have sought various methods Zhang Jian (2009) studies the impact of to reduce carbon emissions from agriculture. In carbon tax on various industries through the CGE particular, developed countries have already started model. For agriculture, the overall implementation research on low-carbon agriculture many years of carbon tax will have an impact on the total ago, and the corresponding mechanisms have been agricultural output of our country. Therefore, relatively comprehensive. For example, the United it should be carried out under a certain level of States issued the Federal Insecticide and sterilization economic development when the tax rate is made. in 1974, regulated the use of agricultural inputs So, the feasibility of the carbon tax policy system such as pesticides and chemical fertilizers. In 1956, should be deeply explored. Discuss the land law was promulgated, from then on, the In addition to tax, there are still many other concept of low carbon agriculture was established, economic incentives in policy making. For the supervision of agriculture was strengthened and example, Chinese scholars use game theory to the impact of agriculture on the environment was analyze government, enterprises and farmers to reduced. realize low carbon agriculture. the government can Making policy or increasing the R & D of use subsidies, carbon tax return, and other economic agricultural carbon emission reduction technology incentives. To encourage enterprises to carry out is usually adopted. The common policy tools low-carbon development, develop low-carbon SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 171 technologies, improve equipment conditions, share and develop ecological agriculture and animal production experience with farmers, so that can husbandry. form a virtuous cycle. (Fan Dingxiang, 2011; He In the course of the development of modern Xiaozhou, 2016). Yang Guo (2016), through the agriculture, a large amount of energy input is study of the relationship between the government needed to promote the development, so the amount and the new agricultural subject, concluded that of carbon emission is very considerable. Some giving a high incentive to the management subject scholars have studied the energy saving agriculture. in the period of high risk aversion. These incentives Luo Jiwen (2010) proposed to use the wind, solar and can be tax or economic incentives and so on. On biomass energy to replace the chemical fuel, and to the contrary, low risk gives a lower incentive. Yang implement the economize measures such as water Yunhua (2018) also proposed that subsidies and saving, fertilizer saving, medicine saving and so policies should be taken as the basis to protect the on. Developing cycle, stereoscopic and compound development of low carbon agriculture. agriculture is necessary. Qi Yanbin (2010) proposed Many scholars emphasized that the research to use straw and manure to generate electricity or and development of agricultural carbon emission fuel. Chen Ru (2017) put forward micro irrigation technology also played an important role in (drip) irrigation, straw feed and fertilizer. reducing carbon emissions from agriculture. In this In addition, there are many other technical field, the more authoritative scholar Smith.P made measures that have a positive effect on reducing a qualitative study of 18 major agricultural carbon carbon emissions from agriculture. Zeng Dalin reduction measures in 2006, and put forward that the (2013) proposed to carry out low-carbon education, environment friendly technology was the core. The train new farmers, supply talent guarantees, and government’s role in this is economic incentives, establish demonstration low-carbon test bases. supporting technology developers and subsidizing As a demonstration, when developing low-carbon users. In 2008, 6 categories of 20 small types of agriculture, it must be combined with local resource carbon emission reduction measures were tracked endowments to make full use of resources. Chen and monitored in accordance with different field Ru (2018) proposed a lateral space ecological implementation conditions. The effect of measures compensation transfer payment, which can not only was evaluated in detail. The most effective is develop low-carbon agriculture, but also reduce the to strengthen the management mechanism of central financial burden. In China, north, northwest agricultural activities, followed by restoration of and northeast are used as compensation zones, the soil fertility. South and Southwest are used as payment zones. Different technical measures will have a Some scholars have also conducted research positive impact on agricultural carbon emissions, through the establishment of regional ecosystems, For example, from the perspective of farming, using BECCS (Bioenergy with Carbon And increase the planting density of crops, the rational Storage) to reduce the pressure on agricultural management of the treatment of feces, the carbon emissions from the environment, while development of organic agriculture. In addition taking into account the coordinated development of to the CO2 content in the air, it also increases the various parts of the system. (Tavoni 2014; Lotze- carbon sequestration capacity of the soil. (Paustian Campen 2013; Riahi 2017; Rockstorm 2017) K, 2000; Bracmort K, 2010; Fuss, 2013; Stmith, 2015). Zhao Qiguo (2009) proposed to popularize STUDY ON THE PROBLEM OF ridge tillage, no tillage, soil testing and formulated AGRICULTURAL CARBON EMISSION fertilization, and livestock and poultry breeding FROM DIFFERENT PERSPECTIVES techniques in agricultural production. Ceng Yiyu Due to the agricultural activities involve a (2010) proposed to improve the production mode wide range of contents, scholars in various countries by drawing on the experience of developing low- have discussed this problem from different view in carbon abroad. We should carry out conservation the actual research process tillage, popularize efficient fertilization techniques, improve the utilization rate of chemical fertilizer, 172 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

5.1 International Scholars from Multiple emissions of the entire ecosystem, a release of Perspectives organic carbon in the soil, and a negative impact on the carbon balance of the agricultural system. 5.1.1 Research on the Relationship between Yadav Dhananjay (2017) researched that Canada’s Farmland Factors and Ecosystem Construction soil carbon dioxide emissions account for 20% of When discussing the relationship between total greenhouse gas emissions. It is believed that agricultural land and carbon emissions, the research careful management of irrigation and fertilization content is mostly based on the carbon emissions can help reduce CO2 emissions in the agricultural caused by the mutual conversion of different types sector and protect soil carbon stocks. Desjardins of agricultural land. Joseph (2008) evaluated the RL (2005) suggested that crop rotation, reduction behavior of land reclamation and deforestation of fallow frequency in summer, conversion of as agricultural land. Although the use of plants cropland to grassland, and nutrient management such as reclamation as biomass energy can be through fertilization could increase soil carbon used to replace fossil fuel combustion to a certain sequestration opportunities and increase soil degree, it can reduce fuel-induced agricultural carbon stocks. Franzluebbers, AJ (2005) studied carbon. The issue of emissions, but such changes soil organic carbon sequestration and greenhouse in land use patterns will result in a multiplication gas emissions from agricultural activities in the of total agricultural carbon emissions. Arevalo southeastern United States, and concluded that (2011) conducted research on agricultural land in conservation tillage is an effective strategy that can Alberta, Canada, and found that the combination be implemented decades later and for centuries. In of poplars around agricultural land can effectively the case of farming and severe erosion, some soil reduce agricultural carbon emissions. Lloyd, Colin organic carbon loss was regained. R. (2013) converted wetlands to water through flooding and drainage to agricultural land. It 5.1.3 Crop Research in Specific Areas has a positive effect on alleviating agricultural Different agricultural production conditions greenhouse gas emissions and increasing land and crops are closely linked and affect each other carbon sinks. However, the comparison between in a certain range. They also have different impacts this process and dryland agriculture is complex, and contributions on carbon emissions from including on-ground Underground, horizontal and agriculture. Therefore, it is of great significance to vertical processes, and then put forward feasible study the impact of agro-ecosystems in a region on measurement methods, have guiding significance carbon emissions. for the practical process. Baumann, Matthias (2017) Palmborg, C. (2012) studied the abandoned studied Chaco in lowland plains of Argentina, agricultural peat near Mara, Sweden, by planting Paraguay, and Bolivia, because of the expansion reed reed Canary (RCG) to restore agricultural of cattle and soybean plantations into the forest land, increase soil fertility, and reduce carbon and the replacement of grazing land with soybean emissions from agricultural land. Asumadu- cultivation, occupying the land of tropical arid Sarkodie (2017) studied the relationship between forest systems. The use of changes has led to a large the entire agricultural ecosystem and carbon amount of carbon emissions. dioxide emissions. The results showed that the increase of carbon dioxide emissions from the 1% 5.1.2 Relationship between Soil Carbon Pool rice harvested area would increase by 1.49%, the and Agricultural Carbon Emissions increase of biomass burning crop straw by 1% In the various sources of agricultural carbon carbon dioxide emissions by 1%, and the increase emissions, the change in soil carbon pool is an of 1% carbon dioxide emissions by 1.38 of grain important source. Therefore, reducing carbon production by 1.38. %, agricultural machinery emissions caused by soil erosion or increasing soil increased by 1% in the long run, carbon dioxide carbon sinks is an effective means. emissions will be reduced by 0.09%. In addition, Lal (2003) found that the process of soil there is a two-way causal relationship between erosion will lead to an increase in the carbon carbon dioxide emissions, grain output and biomass SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 173 burning crop residues. Grainger’s causality eight types according to the size of the numerical indicates that Garner’s agro ecosystem is sensitive values. Tian Yun (2012) conducted a study on to the vulnerability of climate change. Ballesteros- China’s agriculture, and the results show that the Possu (2017) shows that the forests around the development of China at this stage is mainly due farm can reduce agricultural carbon emissions and to weak decoupling and strong decoupling, which estimate the contribution of various windbreaks proves that China’s agricultural carbon emissions through the study of three large and medium size in recent years have been somewhat alleviated. farms and various crop planting systems. Machado The environmental Kuznets curve was first (2017) studies the carbon emissions of various raw proposed by the American economists Grossman materials for ethanol production. The results show and Kruegur in 1992. It is used to quantify the that the carbon emissions of sugarcane and corn are relationship between environmental pollution and the smallest, while beets are relatively much more, economic development, and confirms the “inverted and ethanol is a biomass fuel, which can reduce the U” relationship between the two. Lefting at the carbon emissions from the source of fossil fuels. inflection point, the side shows that the increase in per capita income is based on the destruction of 5.2 Chinese Scholars the environment, while the per capita income in the right side of the defect increases, the corresponding 5.2.1 Research on Agricultural Land Use technical level also improves, and the production and Carbon Emissions efficiency increases, which is conducive to the Through the research and analysis, Chinese continuous reduction of pollution levels and scholars believe that conversion of agricultural improvement. There is a close relationship between land to non-agricultural land (returning farmland to agricultural carbon emissions and environmental forests, grasslands and afforestation), appropriate changes, so many scholars use the curve for analysis. use of extensive land to replace intensified land, Li Bo (2011) studied the obvious inverted “U” and rational farming and fertilization of agricultural relationship between agricultural carbon emissions lands will reduce agriculture. carbon emission. and agricultural economic growth in China from (Tian Yun, 2013) 1991 to 2008, showing that 13 provinces and cities exceeded the per capita GDP of 20,899 yuan. 5.2.2 Research on Agricultural Carbon Zhang Zhigao (2017) estimated that the EKU curve Emission and Economic Development Level in Anyang is still on the left of the inflection point, Based on the measurement of agricultural and carbon emissions will continue to increase with carbon emissions, many scholars study the per capita GDP growth in a short period of time. relationship between the carbon emission and the economic development, in the study of such issues, 5.2.3 Time and space status of agricultural many through the decoupling effect and the Kuznets carbon emissions curve Conduct the analysis. Around China’s agricultural carbon emissions, The decoupling effect originated from the many scholars use national or provincial data concept of physics, which was introduced into to analyze the situation and level of agricultural agriculture a t the end of the 20th century. Its main carbon emissions from the perspective of time and purpose is to measure the relationship between space, and explore various influencing factors and economic growth and energy consumption or the summarize the reasons for the difference. quality of the environment. The most commonly From the point of view of time, Li Bo (2011) used two models are OECD and Tapio decoupling shows that the total emissions of China’s agricultural models. The former is measured using base- carbon emissions in 1993-2008 years show a phased period and end-of-year data, while the latter is rise in total emissions and are divided into four an improved method that uses elasticity theory to periods, which are rapid rise, slow rise, rebound analyze and classify the relationships into three in growth rebound, and a significant slowdown in types: strong decoupling, weak decoupling, and growth. In the four periods, it was proved that the expanded connection which are divided into total carbon emissions of agriculture in China in 174 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

2008 were mainly concentrated in the agricultural previous single carbon emissions or factors to provinces, while the areas with higher intensity capture the carbon elements in the air and fixe in were located in the developed cities, the eastern the soil, also the methods of research are getting coast, and the central agricultural centers. Due deeper and deeper. For example, carbon emissions to the difference of calculation caliber and index are measured from the first commonly used series selection, the research conclusions of different method to the life cycle of carbon footprint. scholars are different. Tian Yun (2012) conducted a According to the literature review above, according study of the country’s carbon emissions from 1995 to the current research situation in China, the to 2010, showing that carbon emissions are “up, research system in the following aspects can enrich down, and up”. The characteristics of the phases the research system of agricultural carbon emission are that in 2010, the carbon intensity of each region in China. was the highest in the west, followed by the central 1, The lack of a unified scientific index and western regions. system, it is difficult for horizontal comparison. In For the study of spatial disparity, Liu Huajun the calculation of carbon emissions, because of the (2013) measured the regional gap of China’s carbon wide range of agriculture, the measurable carbon is emission by Gini coefficient method. The results different, and the emission coefficient does not have show that there are regional disparities but the gap a unified reference and reference. Therefore, the is continuously decreasing, but the carbon emission carbon sources selected in the study of the students trend in China is developing to high levels and high are different from the washing out, and the results levels. Pang Li (2014) also got the same conclusion are different and do not have the comparability. that the difference between the total amount and 2, The micro level of research is insufficient. intensity of carbon emission decreased significantly Agricultural activities are not only made up of in different regions, and the main reason for the natural materials and activities in nature, but there gap was the difference in the level of agricultural are various kinds of agricultural subjects involved in development. Wu Xianrong (2015) estimated the it, but few of the existing studies have concentrated spatial heterogeneity in 31 provinces and regions on the effects of the behavior patterns of farmers of mainland China for 2001-2012 years. The results or new types of agriculture on agricultural carbon showed that the gap between the regions of carbon discharge. Research the role of this behavior. emission reduction was obvious and there was 3. From the point of view of regional division, spatial dependence. It indicated that the potential there are a large number of literatures in China of carbon emission reduction in a region was not to study agricultural carbon emissions from a only affected by the self economic and industrial national or administrative provincial point of view. conditions, but also the potential of carbon emission This kind of research can evaluate the impact of reduction in a region. It is related to the surrounding economic development, population status or policy environment and the development of neighboring implementation on agricultural carbon emissions provinces. He Yanqiu (2018) adopted the method in a certain region, and the lack of agriculture of dynamic correlation and regression analysis, under a specific ecological environment or starting from the carbon emission pattern, studied natural conditions. The study of industrial carbon the obvious gaps in the province’s carbon emissions emissions is not conducive to the evaluation and reduction, the central emission levels decreased, the measurement of the impact of environmental western emission levels increased. In recent years, factors on agricultural carbon emissions. many scholars have also discussed the scope of 4, More carbon footprint method is used to the province based on the actual development of measure agricultural carbon emission, to extend each region, and analyzed the changes in carbon the research scope of carbon emission, to measure emissions and influencing factors in each province. the production, transportation and consumption, to consider the carbon emissions of agricultural LITERATURE REVIEW products, to make clear the key link of carbon To sum up, domestic and foreign research emission, and to provide a necessary basis for on agricultural carbon emissions extends from policy formulation. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 175

HERDERS’ PREFERENCE FOR INCENTIVE ATTRIBUTES OF COMPENSATION AND REWARDS POLICY FOR GRASSLAND PROTECTION IN INNER MONGOLIA: THE CASE STUDY OF ORDOS

Bao Zhang, Guanghua Qiao (College of Economics and Management, Inner Mongolia Agricultural University, Hohhot, 010010)

Abstract: Purpose - Strengthening incentives on compensation and rewards policy for grassland protection is the main concern in the field of grassland ecology. The purpose of this paper is to identify herders’ preference for incentive attributes of the policy. On the basis of results from mixed logit model, the implicit prices for each attribute and total willingness to accept for a range of policy combinations are estimated. Design/methodology/approach - Primary data from 120 herder households are analyzed in the case of Ordos of Inner Mongolia through choice modeling. Conditional logit and mixed logit model are used to estimate herders’ preference. Findings - Empirical results suggest that pension and repayment periods of loan have positive impact on herders’ preference, but enforcement and penalty affect their preference conversely. Note that herders with different scale of grassland also hold similar preference for those attributes. Furthermore, herders are willing to give up CNY4.64 per mu of eco-compensation for the policy scenario incorporating CNY1200 of pension, 5 years of repayment and CNY600 of penalty and 50 per cent of enforcement. Originality/value - Based on the choice modeling, this paper demonstrates herders’ preference for those incentive attributes, so that it provides a reference to policy makers in terms of improving herders’ livelihood on the condition of rigorously enforcement of grassland policy.

Key words: grassland policy; strengthening incentives; choice modeling; herders’ preference; Ordos

INTRODUCTION role in northern China. Central government has Large area of grassland is experiencing the allocated USD0.65 billion to Inner Mongolia in degradation with different extent due to overgrazing order to spend on grassland protection policy in over a long periods in China (Yang and Wang, 2011-2016 (Gao et al., 2016). The policy reduces 2015; Yang et al., 2016). In order to mitigate the the area of erosion and desertification in grassland degradation and achieve the sustainable utilization by 6.71 million ha, as well as decreases overgrazing of grassland, compensation and rewards policy rate to 13.32 per cent in 2014; pastoral per capital for grassland protection with USD2.14 billion of net income reached to CNY14000 in 2015 (Li and central governmental budget was initiated in 2011, Yao, 2016; Wen, 2016). Simultaneously, grassland aiming at partially or completely reducing livestock policy also increases vegetation coverage and numbers in accord with the capacity of grassland biomass in line with report on grassland monitoring through giving out monetary subsidy to herders of 2015 (China(PRC), 2015). To sum up, the first (Gao et al., 2016). In line with requirements of the round of policy was accomplished, and grassland policy, fresh grassland yield amounted to 508.03 ecology was restored to some extent as well in 2016. million ton and average overgrazing ratio is also Previous studies have made some progress on declined to 15.5 per cent. Furthermore, pastoral per theory and application in terms of compensation capital net income increased to CNY8078 in 2015 and rewards policy for grassland protection. (China(PRC), 2016). Compensation and rewards policy for grassland Inner Mongolia, as one of targeted area of protection reflected intrinsically natural resource policy implementation, owns 88 million ha of users have positive effects on environmental and grassland area, covering meadow grassland, typical ecological system in the process of consuming grassland and desert grassland and grassland desert resources, which is also the compensation for from east to west and playing an important ecological ‘positive externality’(Pan, 2015). Nonetheless, 176 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Zhong et al. (2016) and Li (2015) illustrated Wei and Hou (2015) suggested that duration of that limited public funds, as well as insufficient the policy be extended, public funds for grassland incentives for policy, gave rise to herders’ lower protection be increased, and diverse feeding modes willingness to protect grassland ecology. Bao of animal husbandry be developed. In order to (2015), Yin (2017) drew the conclusion that strengthen incentives of the policy, Li (2015) monetary subsidy level, the duration of policy proposed measures including higher subsidy and projecting mechanism regarding monitoring level, loan policies and technological support. and incentive mechanism were still noticeable As to poor or aging herders, Li et al. (2014)Li et problems in Inner Mongolia. Liu (2014) pointed al. (2014) illuminated the policy should enhance out that grassland policy contributed to reduction of the standards of pension and medical insurance livestock number and alleviating grassland pressure, apart from subsidization of reduction in stock but there is still a probability of overgrazing in number. In addition, Sai et al. (2016) analyzed practice. Hu et al. (2015b) indicated herders with the results of implementation of grassland policy small-medium area of grassland were inclined in Xianghuang Banner of Xilingol League and to overgrazing. So, strengthening incentives for reported that herders who fed sheep in accord with policy should take into consideration those herders grass-livestock standard were looking forward to in essence. Meanwhile, Jin and Hu (2013) found strengthening monitoring in order to ensure the that herders with smaller area of grassland had policy implementation. Therefore, Zhong et al. higher probability of overgrazing. Furthermore, Hu (2016) considered grassland policy should improve et al. (2015a) also observed the primary cause of the efficiency of monitoring through penalty and overgrazing for herders derived from the grassland employing grassland-guarding staffs. policy that did not increase their income level. In summary, how to strengthen incentives on Li et al. (2014) analyzed herders’ satisfaction compensation and rewards policy for grassland with the policy for grassland protection through protection is main concern for policy makers. Logistic model and found out ethnic, subsidy Furthermore, existing studies paid more attention to amount and expense on production were significant the analysis of grassland policy from eastern Inner factors influencing their satisfaction. Ma and En Mongolia. In fact, those regions from western Inner (2016) concluded that subsidy amount could not Mongolia have more urgent demands on grassland offset herders’ income decrease due to reduction policy due to fragile grassland ecology. Thus, the of livestock, leading to increase ruminant numbers aim of this paper is to analyze herders’ preference to maintain household livelihoods. By contingent and willingness to accept for incentive attributes valuation method, Zhen et al. (2014) pointed out of compensation and rewards policy for grassland that herders’ willingness to accept for subsidy protection through the method of choice experiment was CNY41.6 per mu, whereas the public sector’s (CM) in Ordos of Inner Mongolia. Eventually, willingness to pay was CNY35.2 per mu. Wei and we will select an optimal policy scenario that Hou (2015) observed 40.19 per cent of herders were contributes to both income increase and strict not willing to reduce livestock numbers because enforcement of grassland policy amongst various insufficient incentives of the policy like lower policy combinations. The case study approach subsidy level, could not offset the opportunity cost is adopted in which grassland of western Inner of reduction of livestock in MaQu county. Mongolia is considered. Ordos’ herders are defined Allowing for shortcomings of the as respondents of compensation and rewards policy compensation and rewards policy for grassland for grassland protection. protection, numerous studies put forward a series The paper is structured as following sections. of measures to improve the efficiency of current In the next section, status quo of implementation policy. In the case study of Xilingol League of Inner for the policy in Ordos is outlined. Following Mongolia, Li et al. (2011) deemed that monetary that, theoretical foundation of choice experiment subsidy alongside substance compensation only is described, along with details of questionnaire met herders’ basic demands, without consideration designing and field survey. In section 4, respondents’ of the issues of sustainable development. Thus, characteristics are set out while in section 5 and 6, SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 177 the results from choice experiment are displayed. These on-going issues are a source of concern A discussion regarding presented results and some for herders and policy makers. In particular, conclusions are reached in final section. herders’ demand on grassland policy is important source of policy modification. Hence the aim of CASE STUDY CONTEXT this paper is to consider strengthening incentives The case study area is located in Ordos of Inner on the policy through preference of herders. We Mongolia. Ordos city administrates two municipal select Ordos’ herders living in desert-grassland as districts and seven counties, in which population suppliers of grassland improvements arising from amounted to 2.05 million in 2016 (Bureau of Ordos policy change, and the choice modeling (CM) Statistics, 2016). The climate here is characterized approach is applied to analyze. by drought and strong wind throughout year, with 300 mm of precipitation. Grassland area of Ordos CHOICE MODELING AND amounts to 6.7 million ha, and available grassland APPLICATION DETAILS area is 5.9 million ha therein(Bureau of Ordos 3.1 Choice modeling Statistics, 2016). Types of grassland comprise We analyze herders’ preference for grassland typical grassland, desert-grassland, grassland- policy using choice modeling (CM). In field of dessert, desert, lowland steppe and marsh, the environmental economics, the stated preference largest distribution of which is desert-grassland, approach and choice modeling in particular are accounting for 58.9 per cent of total area of grassland generally used to valuate environmental ecosystem (Gao et al., 2008). In particular, Ordos’ herders not services or other non-market environmental goods only own grazing grassland, but also have artificial (Vorlaufer et al., 2017). CM is the technique in grassland that is mainly used for cultivating forges. which respondents make choices under different Meanwhile, this region adopts the grazing pattern situations comprising of a series of attributes including free grazing and indoor feeding. (Adamowicz et al., 1998; Boxall et al., 1996). It However, grassland is destroyed due to land is able to measure the valuation of multi attributes reclamation and overgrazing since 1950s, giving constituting of goods, services or policies (Bennett, rise to lower cover of vegetation, desertification 2010); also can reveal more information arising and continuous sandstorm (Gao et al., 2008; from respondents’ preference (Jin and Wang, 2005). Zhang et al., 2014). During the year of 2000-2010, The theoretical foundations of CM are based degradation, desertification and salinization area in Lancaster’s consumer theory and random utility of grassland reached to 4.6 million ha in Ordos, theory. Lancaster points out consumers’ utility can and the degradation area of grassland accounted be described as multi characteristic attributes of for 68 per cent of available grassland area therein. goods; utility or preference orderings are assumed Vulnerable conditions severely affect sustainable to rank collections of goods indirectly through the development of grassland ecosystem (China(PRC), characteristics that they posses (Lancaster, 1966). 2015; Wan et al., 2012). In line with random utility theory, it describes the In order to restore grassland ecology, Ordos discrete choice in a utility maximizing framework commenced compensation and rewards policy for (Wang et al., 2007). Utility is assumed to include grassland protection in 2011 and the first round of deterministic component and stochastic component policy was completed in 2015. Within this period, (Bennett, 2010). vegetation coverage enhanced to 52.7 per cent Hence we posited that the grassland policy is and trend toward desertification was controlled. a combination including incentive attributes with Furthermore, herders’ income and perception on different levels. The equation that herders choose grassland protection were improved. However, alternative (i) over other alternatives (j) if U(i)>U(j) some issues deriving from the policy still remained can be denoted: in Ordos. For instance, current subsidy level was unable to offset herders’ opportunity cost for (1) grassland protection; the policy had unobvious impact on herders with small parcel of grassland (Sa et al., 2016). 178 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Where, for any individual n, the utility is (Whitehead et al., 2008). Thus, the utility function described as observed component (V) and random in which individual n choose option i over j in a component (ε). Xni represents the incentive choice set is denoted by: attributes of alternative grassland policies (i) that respondents select. Furthermore, individual utility (5) is also affected by socio-economic characteristics

(Sn)apart from incentive attributes due to Where X is a vector of observed terms, βn heterogeneous preference. vary over respondents with density f (β|Ө+) where As random component is included in the represents the parameter of distributions of β in utility, the probability of choosing alternative policy population. εni is iid extreme value. (i) over policy (j) is to predict individual preference The general model allows parameter matrix to (Adamowicz et al., 1998), which is given by: be expressed as β=b | η, in which b is population mean, and η is individual deviation from that (2) population mean. Thus, the utility function is rewritten as: Where all alternatives j are included in choice set Cn. (6) To calculate the probability of choosing alternative (i), stochastic term assumed to be Because we cannot calculate choice independently and identically distributed (IID) probabilities accurately, it is estimated as mixed following Gumbell distribution (Blamey et al., logits with density f as a mixing distribution (Wang 2000). The usual assumption regarding stochastic et al., 2007). term must be made. The probability of choosing alternative policy is expressed by: 3.2 Application Details

(3) 3.2.1 Questionnaire Design and Hypotheses The initial questionnaire was drafted using the results of focus group discussions. One focus group Note thatμis a scale parameter assumed to equal was held at Inner Mongolia Agricultural University one, implying constant error variance. Equation (IMAU) in June in 2016; the other one was held (3) is estimated by conditional logit model (CL) in Darhan Muminggan Joint Banner of Baotou city with assumption of Independence from Irrelevant in November in 2016. Taking into consideration Alternatives (IIA). IIA means that relative odds of the effects of current grassland policy on between two alternatives is unaffected by other herders, attributes and levels that contribute to alternatives (Hanley et al., 1998). Indirect utility stimulating their willingness to protect grassland function for choosing alternative i is modeled as: were key points discussed in focus groups. Staffs from regional government, as well as Expert from (4) College of Economics and Management (CEM), College of Grassland, Resources and Environment

Where ASCi is alternative specific constant (CGRE) within IMAU and the Institute of Grassland term, βis parameter vectors of X, a vector of k Research of Chinese Academy of Agricultural attributes. γis parameter vectors associated with Sciences, discussed and confirmed the attributes interaction terms of ASC and socio-economic with different levels (in Table 1). variables of individuals. However, CL is restricted to IIA assumption in general, mixed logit model, or random parameter model (RPL) entirely relaxes this assumptions due to taking into consideration of heterogeneous preference and correlation of pairs of alternatives SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 179

Table 1 Attributes and levels Attribute Current policy Level1 Level 2 Level 3 Pension 300 600 900 1200 (Yuan/Month) Repayment periods of loan 1 2 3 5 (Year) Enforcement (%) 10 30 50 70 Penalty 100 200 300 400 (Yuan/Sheep) 5 7.5 10 Conditional eco- 2.5 Conditional on Conditional on Conditional on compensation Unconditional meeting grass- meeting grass- meeting grass- payment (Yuan/Mu) payment animal balance rules animal balance rules animal balance rules

The complete set of possible combinations Here, pension is the money that herders can with 5 attributes and 4 levels (including current attain over 60 years old. We hypothesize that aging policy) is 1024 (45), which is named full factorial. herders are willing to protect grassland, along with An orthogonal experimental design was applied more pension. In focus group discussion, one-year for selecting a fraction of full factorial that is repayment is stressful for herders to reduce livestock representative. After removing dominant choices, number because of uncertainty of sheep market. 20 choice sets were selected and assigned to four Hence longer repayment periods are likely to affect blocks, with 5 choice sets for each block. As a herders’ preference for the policy. Enforcement result, four versions of the questionnaires were refers to the probability of being caught due to designed, each one is only distinguished by the overgrazing, in other words, it indicates whether the levels of attributes in choice sets. An example of policy implements strictly. Currently, the possibility choice set is displayed in Figure 1. Apart from of being caught is 10 per cent if herders’ livestock choice questions, respondents were asked for basic is over capacity of grassland. Simultaneously, in information on production, altitude towards policy terms of penalty, CNY100 per excess sheep would and demographic characteristics. be imposed on herders if they overgraze. Thus, herders are probably inclined to choose status quo, New compared with strict enforcement and high penalty. Policy current New Policies Policies attributes policies I At present, eco-compensation payment is CYN2.5 II per mu no matter if you overgraze. Respondents Pension (￥per 300 600 600 possibly prefer conditional payment as a result of month) higher subsidy level, even if it is determined by Repayment periods of loan 1 3 5 grass-animal balance rules. (Year) Enforcement 3.2.2 Survey method 10 70 30 (%) 8 counties of Ordos are located in semi- Penalty 100 200 400 pastoral area and pastoral area, four of which are 7.5 5 Conditional located in pastoral area. We selected Wushen Conditional Conditional eco- payment payment county and Hangjin county from four counties. compensation 2.5 on meeting on meeting Gridlines were drawn in the maps of these two payment(￥per grass-animal grass-animal places according to their longitude and latitude. mu) balance rules balance rules Following that, we only chosen grass-animal I like this balance districts as sample area in each county, and option the □ □ □ assigned numbers to these grids. Random function MOST Figure 1: Example choice set of Excel was used to identify villages where survey was going to conduct. We confirmed 10 villages in Hangjin county and 7 villages in Wushen county, 180 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 respectively. Herder households were randomly RESULTS selected for each county, 120 households were The choice data was analyzed using the interviewed in total. Ultimately, 120 questionnaires statistical software package of Stata. Two different were collected and available for analysis, with models were estimated: Conditional Logit model 32, 31, 29 and 28 respondents for each version of and Random Parameter Logit Model, aiming at questionnaire. testing the explanation of attributes in choice sets Pilot survey was conducted in May in to respondents’ preference, as well as robustness of 2017, with sixteen herders from Xilin Hot being models. In line with the results of model, herders’ interviewed. Data being collected, on the one hand, willingness to accept was estimated. was used to test herders’ response to attributes with different levels and explanation of choice task; on 4.1 Conditional Logit Model (CL) the other hand, to revise experimental design for The conditional logit model was estimated improving efficiency of main survey. including attributes and interaction terms of ASC with socio-economic variables. Excluding 3.2.3 Descriptive statistics respondents who always chose status quo, the Socio-economic variables used in models results were showed in Table 3. are displayed in Table 2. In pastoral area, middle- aged labor force is dominant in animal husbandry Table 3: Conditional Logit Results production, and over 50 per cent of household head VARIABLES Coefficients Z Statistics are male Mongolian. As shown in the table, the Pension1 0.1625*** (6.738) average age of respondents was around 49 years Repayment periods of 0.1518*** (3.776) old, with the proportion of female and Mongolian loan accounting for 32.5 per cent, 81.67 percent, Penalty1 -0.0310 (-1.050) respectively. Years of schooling were 9 years on Enforcement1 -1.0764*** (-2.945) average, which is equivalent of level of junior Conditional eco- 0.2537*** (9.427) middle school. In addition, average family size was compensation payment 3 persons with the average grassland area of each ASC × age 0.0349** (1.989) household being 2171 mu, in which the livestock ASC × female -0.0231 (-0.066) number was 220 sheep unit. ASC × family size -0.2886** (-2.367) Table 2: Descriptive statistics on socio-economic ASC × ethnic -0.4894 (-1.172) characteristics ASC × education 0.0466 (0.871) Characteristics N(%) Mean St. Dev. Min Max ASC × grassland 0.0060 (1.000) Age (years) 120 49 11.18 21 77 ASC × livestock number -0.2142** (-2.306) Female (%) 32.5 ASC -0.4981 (-0.378) Ethnic (%) 120 Observations 1,755 Mongolian 81.67 Log- likelihood -433.67 Education (years of 120 9 3.65 0 16 Prob>chi(2) 0.0000 schooling) Pseudo R2 0.3252 Family size 120 3 1.26 1 6 AIC 893.3433 Grassland (mu) 120 2171 2547.25 0 18500 BIC 964.4562 Livestock Note: *** p<0.01, ** p<0.05, * p<0.1 number 1 120 220 175.06 0 1100 Variables were divided by 100 (sheep unit equivalent) In line with the results of conditional logit model, attributes excluding punishment are obvious at 1% significance level and consistent with SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 181 expectation. Respondents prefer alternatives with 4.2 Random Parameter Logit Model more pensions, longer repayment periods of loan Allowing for heterogeneous preference, RPL and higher conditional eco-compensation payment. is a preferred model to explain herders’ preference However, they would be inclined to choose current for grassland policy. Similar to CL, random grassland policy if policy enforced more strictly. parameter logit model included policy attributes Contrary to expectation, penalty is insignificant and interaction terms of ASC with socio-economic in Ordos, possibly indicating this attribute has no variables. Also, we fixed socio-economic variables effect on individual preference for new options. and treated attributes as random variables that can The sign and significance of ASC illustrate herders be varied among individual choices. In addition, the only pay attention to certain of attributes rather than full dataset was split into two samples according policy combinations. to average household grassland area, aiming at In terms of socio-economic variables, herders revealing respondents’ response to grassland policy are willing to choose the “change” sceneries, as further under different grassland areas. The results the age of herders grows older. Compared with of RPL were displayed in Table 4. alternative grassland policies, respondents with In full dataset, policy attributes are significant bigger family size and more livestock numbers are and consistent with expectation. Similarly to likely to support status quo, showing an unexpected conditional logit model, respondents are likely to sign. support changed scenario as pension is increased.

Table 4: Random parameter logit model results Grassland Grassland Full dataset area < 2180 are >2180 (Model1) (Model 2) (Model 3) VARIABLES Mean SD Mean SD Mean SD 0.0585** — 0.1462*** ASC x age (2.148) (2.935) 0.4995 0.8459 — ASC x female (0.820) (1.228) -0.2902 -0.2859 — ASC x family size (-1.494) (-1.301) -0.4753 — — ASC x ethnic (-0.635) -0.0052 — — ASC x education (-0.061) 0.0228* -0.0770 0.0121 ASC x grassland (1.861) (-1.400) (1.090) -0.5592*** — — ASC x animal (-2.911) -0.7104 1.9498** -7.0392*** ASC (-0.363) -2.103 (-2.684) 0.0026*** 0.2278*** 0.3302*** 0.2722*** 0.2418*** 0.2373** Pension# (5.547) (3.818) (4.451) (3.514) (3.074) (2.573) Repayment periods of 0.2091*** 0.4561*** 0.2403*** 0.0788 0.0328 0.5478*** loan (2.714) (3.835) (3.308) (0.606) (0.227) (3.126) 182 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

-0.0938* 0.2919*** -0.1087 0.4523*** -0.0931 -0.0722 Penalty# (-1.736) (3.997) (-1.482) (4.324) (-1.090) (-0.469) -1.9552*** 1.1978 -2.2524*** -0.0702 -2.1647** 0.6622 Enforcement# (-3.337) (0.677) (-3.091) (-0.044) (-2.297) (0.671) Conditional eco- 0.4436*** 0.3296*** 0.4447*** 0.3497*** 0.5240*** 0.3474*** compensation payment (6.929) (5.725) (5.578) (4.762) (4.483) (3.701) Observations 1,755 1,755 1,215 1,215 540 540 Log-likelihood -394.07 -266.8 -115.76 Prob>chi(2) 0.0000 0.0000 0.0003 AIC 824.14 561.6 270.29 BIC 922.61 633.03 326.08 Note: z-statistics in parentheses *** p<0.01, ** p<0.05, * p<0.1 #Variables are divided by 100

Repayment periods of loan contribute to changing payment. More pensions, longer periods of individual choices, indicating herders prefer repayment and higher eco-compensation level longer periods of repayment. Penalty is notable contribute to choosing alternatives for herders. at 10% significance level, with expected priori. On the contrary, high probability of being caught Respondents are willing to choose current grassland (enforcement) gives rise to support current policy if penalty is augmented. Simultaneously, policy. Positive ASC indicates that herders with herders prefer status quo to alternatives, as policy grassland area below average level are willing to would enforce more strictly. Even though eco- choose alternatives. However, socio-demographic compensation payment is determined by whether variables have no impact on individual choices. livestock numbers are overgrazing, respondents are Herders, whose grassland area is more than inclined to choose new policies if eco-compensation 2180mu, show similar preference to model2. payment level is enhanced. Respondents prefer alternatives including more The inclusion of socio-economic characteristics pension, looser enforcement and higher eco- displays that only herders’ age, grassland area and compensation level. Nevertheless, repayment animals (livestock numbers) obviously impact upon periods of loan and penalty are not significant, their preference. With increasing age of herders, indicating that herders’ preferences are unaffected they are likely to choose alternatives. As grassland by those attributes. The inclusion of respondents’ area enlarges, respondents are willing to support age indicates positive impact on their preference. new policy. Contrary to expectation, herders prefer ASC is obvious at 1% significance level, but with to choosing status quo if livestock numbers are an unexpected sign. increased, because the probability of overgrazing arising from livestock number increase would be 4.3 Estimating willingness to accept amplified so that herders perhaps are imposed on In choice experiment, implicit price is the more penalty. substitute ratio of monetary attribute and non- Previous studies demonstrated that the policy monetary attributes, which is calculated to estimate had no impact on herders with small parcel of marginal willingness to accept (MWTA). Thus, grassland area. Hence we further explore herders’ implicit price refers to herders’ marginal willingness preference for the policy under different grassland to accept eco-compensation payment if grassland area. By removing extremely insignificant socio- policy changes in this study. Here, it is estimated economic variables, herders with grassland area based on random parameter logit model, the results being less than 2180mu pay more attention to the were displayed in Table 5. attributes as to pension, repayment periods of loan, enforcement and conditional eco-compensation SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 183

Table 5: Estimation of willingness to accept Repayment Penalty Pension Enforcement# Policy attributes periods of loan (CNY/excess (CNY/month) (%/100) (years) sheep) MWTA -0.6 -0.5 0.2 4.4 Full dataset WTA -5.4 -2 0.6 3.5 Grassland MWTA -0.7 -0.5 0.2 5.1 area<2180 WTA -6.3 -2 0.6 4.1 Grassland MWTA -0.5 -0.1 0.2 4.1 area>2180 WTA -4.5 -0.4 0.6 3.3 Note: #variable means the probability is divided by 100

Respondents’ willingness to accept varies attributes show the difference between full dataset among attributes. In full dataset, respondents are and sub dataset. For grassland area being less than willing to give up a payment of CNY 0.6 per mu 2180 mu, marginal willingness to accept of eco- in order to get additional pension of CNY100. An compensation payment is – CNY0.7 for additional extra year of repayment makes herders abandon pension. On average, respondents are willing to eco-compensation of CNY0.5 per mu. CNY0.2 per give up CNY6.3 per mu if pension is increased mu of eco-compensation payment is equivalent to from CNY300 to CNY1200 per month. Repayment extra penalty per sheep unit paid in excess sheep periods of loan display the same MWTA and WTA charges. Herders need CNY4.4 per mu of eco- as full dataset. Herders have higher willingness to compensation payment for additional probability of accept for enforcement relative to figures of full being caught if livestock number exceeds stocking dataset. As enforcement is enhanced from 10 per rate. Respondents’ willingness to accept reveals cent to 90 per cent, they need CNY4.1 per mu of eco- that they are willing to give up CNY5.4 of eco- compensation payment on average. With grassland compensation payment per mu if pension increases area above 2180 mu, herders would reduce their from CNY300 per month to CNY1200 per month. WTA by CNY4.5 on average when moving from As the duration of repayment periods of loan is current levels of pension and repayment periods of extended from one year to five years, herders would loan to highest level. Also, respondents revise their abandon eco-compensation payment of CNY2 WTA if the probability of being caught is enhanced per mu. Compared to penalty, herder respondents to 90 per cent. They would increase their WTA by have a relative higher willingness to accept if the CNY3.3 per mu. probability of being caught increases from 10 per In further estimation of WTA, we analyzed cent to 90 per cent, which is CNY3.5 per mu. The herders’ preference order for different policy WTA of eco-compensation payment is just CNY0.6 combinations on the condition of more strict for the increase of penalty. enforcement of grassland policy, and the results Aside from penalty, MWTA and WTA of all were displayed in Table 6.

Table 6: WTA for different policy combinations Repayment Penalty# Policy Pension# Enforcement# periods of loan (CNY/excess WTA combinations (CNY/month) (%) (years) sheep) Status quo 3 1 1 0.1 Alternative 1 12 5 1 0.3 -6.52 Alternative 2 12 3 1 0.5 -4.64 Alternative 3 12 5 6 0.5 -4.64 Alternative 4 12 5 4 0.7 -4.16 Note: #variables are divided by 100 184 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

If pension and duration of loan extends to In the dataset where grassland is less than CNY1200 per month and 5 years, along with 30 2180 mu, respondents hold the similar preference per cent of enforcement and CNY 100 of penalty, to the results of whole sample. Since the landscape herders are willing to give up CNY6.52 per mu of of grassland is characterized by grassland dessert eco-compensation payment on average, compared in Ordos, not only are grassland conditions poor, with status quo. We observe that herder respondents but also grassland area for each household owning have same WTA in alternative 2 and 3, but is limited. Hence herders have strong preference alternative 3 involves longer periods of repayment for pension, repayment periods of loan and eco- and more penalties. Respondents’ willingness compensation payment to obtain more income. to accept for alternative 4 is relative low to three Simultaneously, negative sign of enforcement other alternatives, meaning that herders are likely indicates these herders are looking forward feeding to abandon CNY4.16 per mu of eco-compensation more ruminants. Contrary to expectation, penalty payment, with enforcement and penalty increasing has no impact on respondents’ preference, which to 70 per cent and CNY400, respectively. probably attributes to grazing pattern including indoor feeding and grazing in this region. Excess DISCUSSION AND CONCLUSIONS sheep reared in pens rather than in pasture would not In order to strengthen incentives on be fined in Ordos so that herders show indifference compensation and rewards policy for grassland to penalty for overgrazing. protection, this study analyze herders’ preference Herders with grassland area over 2180 mu, and willingness to accept for the policy in Inner prefer alternatives involving more pension and Mongolia in the case of Ordos. In line with the higher eco-compensation payment; also support results of random parameter logit model, we status quo if the probability of being caught arising observed herders’ heterogeneous preference and from overgrazing is augmented. In addition, we sources of such preference. In full dataset, all policy observed herders with larger grassland area are attributes are obvious at different significant level. not inclined to take a loan, because their artificial The preference for pension reflects herders not only grassland can meet feeding demands. consider their current income, but also pay attention The analysis of willingness to accept reveals to their income after 60 years old. In particular, some interesting findings. Herders have the lowest pension is an important income source for aging willingness to accept when pension is increased to herders, with the aging phenomenon being serious highest level in three types of dataset, indicating in pastoral area nowadays. Herders need to take a that pension contributes to increasing income in loan to purchase forages due to limited artificial the context of grassland protection. Longer periods grassland, but uncertainty of animal husbandry of repayment have positive impact on cash flow of income cannot assure herders of repayment of animal husbandry production, that’s why herders loans within one year. Hence repayment periods of are willing to give up a certain of payment in order loan show a positive impact on herders’ preference. to extend the duration of repayment. Meanwhile, Negative signs of enforcement and penalty indicate extending years of repayment also contributes earning income prior to grassland protection to addressing the situation where herders obtain in herder respondents’ mind. Conditional eco- more income by means of overgrazing to pay back compensation payment shows herders are willing loan within one year. WTA of enforcement and to reduce livestock numbers if payment level is penalty indicates more rigorous policy means the enhanced significantly. In addition, the inclusion probability of being caught because of overgrazing of herders’ age, grassland and animal shows is enhanced obviously so that it has negative impact significant impact on individual choices indicating on herders’ income, thereby herder respondents the sources of heterogeneous preference. Note that are looking forward to more compensation to the significance and sign of interaction terms of offset their loss. Note that WTA of herders with ASC with grassland is consistent with expectation, grassland area below 2180 mu distinguishes from demonstrating the viewpoint that grassland area the other two samples, revealing they have stronger would also affect herders’ grazing behavior. preferences for policy modification. Eventually, the SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 185 results of WTA for policy combinations reveal that the foundation that herders are willing to choose more rigorous policy alongside higher pension and more strict grassland policy. Thus, the assurance longer periods of repayment is good for herders’ of income increase in the context of grassland livelihood, as well as grassland protection, thereby protection is significant to strengthen incentives on alternative 4 should be the optimal option for herder compensation and rewards policy. households and policy makers. Compensation and rewards policy for REFERENCES: grassland protection is playing an important role in 1. Adamowicz, W.L., Boxall, P.C., Williams, balancing grassland restoration and herders’ income M., Louviere, J.J., 1998. Stated Preference increase. In 2016, the first round of policy has been Approaches for Measuring Passive accomplished, along with some achievements and Use Values: Choice Experiments and shortcomings. By implementation of the policy, the Contingent Valuation. American Journal speed of desertification of grassland is slow down, of Agricultural Economics 80, 64-75. and coverage of vegetation is enhanced. However, 2. Bao, X., 2015. Studies on Grassland the issue of income increase in the context of Eco-compensation in Inner Mongolia grassland restoration is difficult to resolve, which Autonomous Region. Reformation & is nor helpful to stimulate herders’ behavior on Strategy, 115-120 (in Chinese). grassland protection effectively. In order to increase 3. Bennett, J.B., 2010. Choice experiments herders’ income, as well as restore grassland, it is in developing countriesimplementation, necessary to strengthen incentives for grassland challenges and policy implications. policy on the basis of herders’ willingness. 4. Blamey, R., Bennett, J., Louviere, J.J., Thus, this study analyzes the impact of incentive Morrison, M., Rolfe, J., 2000. A Test of attributes being associated with income and policy Policy Labels in Environmental Choice enforcement on herders’ preference through choice Modelling Studies. Ecological Economics modeling, aiming at revealing incentives combining 32, 269-286. grassland protection and income increase. 5. Boxall, P.C., Adamowicz, W.L., Swait, According to empirical analysis of herders’ J., Williams, M., Louviere, J.J., 1996. A preference for grassland policy, we conclude that comparison of stated preference methods the inclusion of pension, repayment periods of loan for environmental valuation. Ecological and conditional eco-compensation payment not Economics 18, 243-253. only contributes to increase herders’ income, but 6. Bureau, O.S., 2016. Ordos Statistical also can positively stimulate herders for grassland Yearbook. Chinese Statistical Press, protection. In particular, increasing pension level Beijing. is extremely necessary for aging herders to support 7. China(PRC), T.P.s.R.o., 2015. National their livelihoods. Because of historical and natural Grassland Monitoring Report (2015). causes, grassland owned by each household is poor Agricultural Department, Beijing.(in conditions, as well as small parcels, which enhance Chinese). the probability of overgrazing. Hence preference 8. China(PRC), T.P.s.R.o., 2016. National for penalty and enforcement provide a reference Grassland Monitoring Report (2016). to policy makers, that is, the policy should take Agricultural Department, Beijing.(in into consideration of difference among various Chinese). grassland types rather than allow no flexibility. 9. Gao, L., Kinnucan, H.W., Zhang, Y., This study also sheds light on herders’ Qiao, G., 2016. The effects of a subsidy valuation on attributes and policy combinations. We for grassland protection on livestock demonstrated that pension and repayment periods numbers, grazing intensity, and herders’ of loan are preferable attributes for herders so that income in inner Mongolia. Land Use they are willing to give up more eco-compensation Policy 54, 302-312. payment in exchange of more pension and longer 10. Gao, X., Yu, Y., Pei, W., Jiang, C., periods of repayment. Also, these two attributes are 2008. A discussion on status quo and 186 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

countermeasures of grassland ecology in 20. Li, Y., Wei, T., Jin, L., 2014. Herdspeople Ordos city. Inner Mongolia Prataculture, Attitudes Towards Grassland Eco- 22-25 (in Chinese). Compensation Policies in Siziwang 11. Hanley, N., Wright, R.E., Adamowicz, V., Banner, Inner Mongolia. Resources 1998. Using Choice Experiments to Value Science, 2442-2450 (in Chinese). the Environment. Environmental and 21. Liu, A., 2014. The effects and issues of Resource Economics 11, 413-428. comepensation and rewards policy in Inner 12. Hu, Z., Kong, D., Jin, L., 2015a. Grassland Mongolia. Grassland and Prataculture, 4-8 Eco-compensation: Rate Differentiations (in Chinese). of “Reward for Balanced Grazing” and Its 22. Ma, X., En, H., 2016. Impact of grassland Reasons. China Population,Resources and protection and subsidy policy on hersmen’s Environment, 152-159 (in Chinese). income. Agricultural Outlook, 24-28 (in 13. Hu, Z., Kong, D., Jin, L., 2015b. Who Chinese). are Small and Medium-sized Holders? 23. Pan, J., 2015. Subject and Relationship of Definition and Origin of Small and Rights and Obligations’ Connotation for Medium-sized Holders in the Rangeland. Grassland Eco-Compensation - Analysis China Agricultural University Journal of Grassland Ecological Protection of Social Sciences Edition, 93-100 (in Subsidy and Reward Program in Tianzhu Chinese). County of Gansu Province. Journal of 14. Jin, J., Wang, Z., 2005. Economic Harbin Institute of Technology(Social valuation of solid waste management in Sciences Edition), 37-44 (in Chinese). Macao - A comparison studies of choice 24. Sa, G., Ma, J., Si, R., Gao, X., Su, Q., 2016. experiment model method and contingent The analysis of implementation results valuation method. . China Environmental of compensation and rewards policy for Science, 751-755 (in Chinese). grssland protection in Ordos. Grassland 15. Jin, L., Hu, Z., 2013. Who is Running and Prataculture, 3-5 (in Chinese). Overgrazing? Variation Analysis of 25. Sai, X., Si, Q., Sun, H., Yi, F., 2016. Herdsmen with Different Scales of The analysis of implementation results Pastureland. China Rural Survey, 37- of compensation and rewards policy for 43+94 (in Chinese). grassland policy: the case study of Xiang 16. Lancaster, K., 1966. A New Approach Huang Banner of Inner Mongolia. Animal to Consumer Theory. Journal of Political Husbandry and Feed Science, 86-88 (in Economy 74, 132-157. Chinese). 17. Li, H., Yao, M., 2016. The results of 26. Vorlaufer, T., Falk, T., Dufhues, T., Kirk, implementation of compensation and M., 2017. Payments for ecosystem services rewards policy for grassland protection and agricultural intensification: Evidence in Inner Mongolia. Grassland and from a choice experiment on deforestation Prataculture, 4-6 (in Chinese). in Zambia. Ecological Economics 141, 18. Li, J., 2015. The problems and strategy 95-105. analysis of grassland ecological 27. Wan, X., Zhang, F., Xue, Y., Li, Y., compensation system - A case of Gansu 2012. The analysis of causes to grassland Province. Pratacultural Science, 1027- degradation in Ordos. Inner Mongolia 1032 (in Chinese). Water Resources, 71-72 (in Chinese). 19. Li, X., Cao, Y., Liu, T., 2011. Discusion of 28. Wang, X., Bennett, J., Xie, C., Zhang, Z., Core Isues in Grasland Eco-compensation Liang, D., 2007. Estimating non-market Mechanism - Taking Grasland Eco- environmental benefits of the Conversion compensation in Xilinguole as an of Cropland to Forest and Grassland Example. Chinese Journal of Grassland, Program: A choice modeling approach. 1-7 (in Chinese). Ecological Economics 63, 114-125. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 187

29. Wei, Q., Hou, X., 2015. Reflections on 34. Yin, X., 2017. Implementation Establishing a Long-Term Mechanism of Performance and Suggestions of Grassland Grassland Ecological Compensation in Eco-Compensation Policies: Based on China. Scientia Agricultura Sinica, 3719- Urat Back Banner, Inner Mongolia. 3726(in Chinese). Ecological Economy, 39-45(in Chinese). 30. Wen, M., 2016. Study on the 35. Zhang, Y., Guo, F., Wang, H., Li, Y., JIa, contermeasures to optimize current M., 2014. Desertification status and control compensation and rewards policy for in Ordos’ grassland. Animal Husbandry grassland protection. Economic Research and Feed Science, 40-41 (in Chinese). Guide, 48-49+104 (in Chinese). 36. Zhen, L., Li, F., Yan, H., Liu, G., Liu, J., 31. Whitehead, J.C., Pattanayak, S.K., Van Zhang, H., Du, B., Wu, R., Sun, C., Wang, Houtven, G., Gelso, B.R., 2008. Combining C., 2014. Herders’ willingness to accept Revealed and Stated Preference Data versus the public sector’s willingness to Estimate the Nonmarket Value of to pay for grassland restoration in the Ecological Services: An Assessment of the Xilingol League of Inner Mongolia, State of the Science. Journal of Economic China. Environmental Research Letters 9, Surveys 22, 872-908. 045003. 32. Yang, B., Wang, C., 2015. Climate change 37. Zhong, L., lu, S., Yang, R., Duan, J., and grassland ecology. Inner Mongolia Liang, X., 2016. Phase Analysis of People’s Press, Hohhot. compensation and rewards policy for 33. Yang, X., Yang, C., Meng, Z., 2016. The grassland protection: an empirical survey current situation,problems and suggestions of three regions in Xilinguole League, of grassland ecological protection in Inner Mongolia. Forward Position, 105- China. Pratacultural Science, 1901- 112 (in Chinese). 1909(in Chinese). 188 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

RESEARCH ON THE EFFECT OF HERDSMEN’S ENDOWMENTS ON THEIR BORROWING CHANNELS BASED ON STRUCTURAL EQUATION MODEL

Yuchun LIU, Chang LIU1 and Changbai XIU (College of Economics and Management, Inner Mongolia Agricultural University, Huhhot, 010010, China.)

Abstract: Herdsmen’s access to credit funds has an important supporting role in promoting modern economic development in the pastoral areas and broadening the channels for herdsmen to increase their income. Based on pastoral survey data, this paper constructs the structural equation model(SEM)using the herdsmen’s relational network as the mediation variable, and studies the relationship of human capital, family economic level，relationship network and herdsmen’ borrowing channels. The result obtained is that the relationship network of herdsmen has a significant influence on the choice of herdsmen’s borrowing channels. Herdsmen’s human capital not only directly affects the borrowing channels the herdsmen, but also indirectly affects the regular borrowing channels through the mediation variable--relationship network. The family economic level has a significant effect on the regular borrowing and informal borrowing of the herdsmen, but the effect of the regular borrowing is greater than the effect of the informal borrowing. Key words: Structural equation model; Relationship network; Borrowing channel

INTRODUCTION of formal financial institutions and obtained For a long time, financial resources have been loans. Informal finance has become a widely- concentrated in large and medium-sized cities above existing financing arrangement inherent in pastoral the county level, and financial resources in rural and areas. Data from China’s Jiangsu Rural Finance pastoral areas have been relatively weak. In 2017, Development Research Center in 2015 showed that the No. 1 Document of the State Council in China 42.91% of households are subject to formal financial (promoting the structural reform of the agricultural constraints and 59.45% of households are financed supply side and accelerating the development of new through the informal financial market. Specifically, kinetic energy for agriculture and rural development) this is due to the heterogeneity of the farmers and called for the promotion of more financial resources herdsmen’s own endowment conditions. The core to the rural areas so that farmers can obtain high- of loan technology of formal financial institution is quality and low-cost financial services. Farmers collecting information from the borrower households and herdsmen’s access to financial services can and identifying and reviewing the information. effectively change their initial endowments, Herdsmen with better endowment conditions can increase the efficiency of agricultural and animal provide enough mortgages. With guarantees, it is husbandry production, and increase income levels. easy to obtain formal credit support, while poorly However, the inherent weak and high-risk nature endowed herdsmen often resort to private credit. of animal husbandry leads to the reverse distortion The connotation of herdsmen’s endowment is of the allocation of pastoral financial resources, the very wide, usually involving the herdsmen’s human poor efficiency of pastoral financial markets, the capital, economic capital, social capital and natural lack of explicit loans to potential herdsmen and capital. This paper examines the endowment of the slow accumulation of primitive capital, thus herdsmen households into human capital, family making it difficult to match the lending technology economic level and relationship network.

1 Corresponding author SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 189

Previous studies have shown that the more Although scholars did not explicitly put forward the endowment farmers and herdsmen have, the easier concept of herdsmen households’ endowment, the it is for them to obtain loans and that the different concept of total household assets is similar to that endowment factors have different effects on farmer of herdsmen households. Chinese scholars such as households’ lending channels (LinLu, 2016) [1]. The Xiangzhi Kong et al. (2004) studied the endowment specific hypothesis is that social networks, trust, earlier. He believed that endowment is the natural and participation in the selection of private lending and acquired resources and agricultural skills by peasants and herdsmen have a significant owned by all family members. These resources and impact. Social trust, regulation, and mutual benefit agricultural skills specifically represent the family’s have a significant influence on the choice of formal human capital, economic capital, social capital, lending by farmers and herdsmen; age, education and natural capital. [5]. Later scholars continued to level, household population, and borrowing expand the concept of endowment, which not only purpose significantly influence the farmers and included the resources and agricultural skills of herdsmen behaviors[2]. Therefore, in the process of family members, but also included the expansion continuous deepening of rural and pastoral financial of individual agricultural skills and the extension reform, the government should balance the pattern of personal endowments. Individuals’ behavior of formal finance and private lending in rural and choices were constrained by family endowments and pastoral areas, and use relationship network as an family decisions (Shi Zhilei, Yu Chi, 2011)[6]. From intermediary to enable herdsmen with different previous studies, it can be seen that endowments endowment conditions to obtain corresponding can be roughly divided into four categories: credit support. human capital, economic capital, social capital, From the perspective of pastoral households’ and natural capital. Zan Yang; Ying Fan; Jing Wu endowments as the ability of pastoral households to (2017) suggested the low financial cost of informal obtain external resources, this paper will examine borrowing: households tent to borrow as much as the herdsmen’s human capital, family economic possible from informal channels until they reach level and relationship network. Using the sample the constraint determined by their social capital, data from four ethnic regions in Inner Mongolia, which significantly crowds out formal borrowing[7] . Ningxia, Xinjiang, and Gansu, a structural equation George Okello Candiya Bongomin(2018) provided model was constructed to explore the path and empirical evidence on phenomena studied in rural intensity of the influence of herdsmen’s endowment areas in Sub-Saharan Africa with poor use of social on their lending channels. capital embedded in customs and norms for doing business. The results highlight the importance of II. LITERATURE REVIEW AND social capital in mediating the relationship between RESEARCH HYPOTHESIS financial intermediation and financial inclusion (i) Literature Review of the poor in rural Uganda[8]. Therefore, in order Domestic and foreign scholars have studied to avoid credit constraints, borrowers tend to a large number of herdsmen households’ lending maintain the necessary long-term cooperation with practices, mainly focusing on the motivation of informal financial lending institutions to prepare borrowing, lending channels, the welfare effect for emergencies (Bell, 1990)[9]. Informal financial of borrowing, and factors affecting lending. institutions often select objects through long-term Herdsmen’ endowments are the key factors cooperation with borrowers when making lending affecting lending. Glass (1954) believed that the decisions. The longer the cooperation, the more quality of the family was measured by the resources likely farmers are to borrow money. (Aleem, owned by the parents, including political capital, 1990)[10]. Duong and Izumida (2002) studied the economic capital, cultural capital, and social capital borrowing of Vietnamese farmer households and [3]. Maria C. Pereira (2017) considered that social found that borrowing purposes have an impact on capital is a multidimensional concept that concerns farmers’ preference for borrowing money. Loans the consumers ability to obtain benefits from their obtained through formal financial institutions are engagement in social activities and social networks[4]. mainly used for productive investment, and loans 190 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 obtained through informal finance are mainly for H3a: Human capital has a positive and living consumption[11]. Tho Pham and Oleksandr significant effect on the relationship network. Talavera (2018) showed that social capital could H3b: The family economic level has a positive facilitate loan applications: firms that have a closer effect on the relationship network. relationship with government officials and other business people can get loans of longer duration [12]. III RESEARCH METHOD AND DATA Overall, the existing literature has mainly studied how and to what extent various types of (i) Research Framework capital affect the financing channels of pastoral In the pastoral credit market, the economic households, and did not conduct further research strength and social relationships of pastoral on the relationship between various types of households can become effective mortgage assets pastoral households endowments. In this paper, the for pastoral households. Similarly, human capital structural equation model can be used not only to can also constitute an independent source of study the direct impact of various types of capital income. However, most pastoral households can on herdsmen’ lending channels, but also to consider only obtain small informal loans based on human the path and intensity of influence among various relationships. Formal finance can hardly meet their types of capital. financial needs. Based on this status quo, this paper explores herdsmen’s lending channels from the (ii) Research Hypothesis perspective of the herdsmen’s own conditions - The pastoral households studied in this herdsmen’s endowments. Its route of action is as paper are divided into three dimensions: human follows: the kind of channels from which herdsmen capital, family economic level and relationship get their loans depends on the type of endowment network. The herdsmen’s human capital and family elements and the total amount of elements owned economic level determine the breadth and depth of by the households. The pastoral’s human capital the herdsmen’s relationship network, and thus affect and the family’s economic level will strengthen the herdsmen’s lending channels. Based on the the relationship networks, and indirectly affect connection between the three, this paper proposes the herdsmen’ lending channels. Of course, the the following hypotheses from three dimensions of relationship between human capital and family pastoral households endowments: economic level can also act directly on pastoral H1: Herdsmen with richer endowments are households’ lending channels. Based on the above more likely to get loans. analysis, a mechanism model for the effects of H2: With different endowments, herdsmen’ pastoral endowments on their lending channels is lending channels are different. presented, as shown in Figure 1. H2a: Herdsmen’s human capital has a direct Borrowing Channels positive effect on formal lending. Herdsmen's Endowment

H2b: Herdsmen’s human capital has a direct H2a Human capital positive effect on informal lending. Formal lending H3a H2C H2c: Herdsmen’s household economic level Relationship H2b may have a directly positive effect on formal network H2C lending. H3 H2b

Family economic H2b H2d: Herdsmen’s household economic level Informal lending level may have a directly positive effect on informal Fig. 1 Influence mechanism of pastoral household endowments on herdsmen's lending channels lending. Fig. 1 Influence mechanism of pastoral household H2e: The relationship network of pastoral (ii) Researchendowments Method on herdsmen’s lending channels households has a direct and significant impact on The structural equation model is a multivariate statistical method for the study of the causality model among latent variables. It combines the two statistical methods of “factor analysis” and “path formal lending and informal lending. analysis” in traditional analysis of multivariate statistical analysis, tests the relationship among variables,(ii) latentResearch variables, and Method error variables in the model, and examines the direct and indirect H3: There is a connection between human effects of independent variables on dependent variables. It is a confirmatory analytical method. capital, family economic level, and relationship Because theThe relationship structural among herdsmen's equation human capital, model family's is economic a level, and relationship network are complex and difficult to measure directly, this paper selects the structural network in the household endowment. equationmultivariate model for analysis statistical to improve the accuracymethod of the for estimation the studyresults. of

(iii) Sources of Data The data used in this paper comes from the pastoral livelihoods survey conducted by the Inner Mongolia Institute of Rural Pastoral Development in 2016 and 2017. The questionnaires include various topics such as infrastructure and environment, economic activities, family wealth status, family dynamics, and population migration in pastoral areas. The survey samples cover 10 husbandry banner counties in the four ethnic regions of Inner Mongolia, Ningxia, Xinjiang, and Gansu. The sample size of the surveyed herdsmen is 1,321 households, 130 invalid samples were removed, and 1191 effective samples are being used as study objects.

(iv) Descriptive Statistical Analysis of Samples The survey results show that among the 1191 sample herdsmen, males account for 68.85% and females account for 31.15%. This shows that the principals of the herdsmen households are still dominated by men; the middle-aged and old herdsmen of the interviewees are the majority, those under 40 only account for 22.75%, and 77.25% of the respondents are over the age of 51. The young and middle-aged in the pastoral areas are less engaged in productive activities; the education level of the interviewed herdsmen is generally low, 70% of herdsmen have received junior high school education or below, and only 4.54% have college education or above. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 191 the causality model among latent variables. It less engaged in productive activities; the education combines the two statistical methods of “factor level of the interviewed herdsmen is generally low, analysis” and “path analysis” in traditional 70% of herdsmen have received junior high school analysis of multivariate statistical analysis, tests education or below, and only 4.54% have college the relationship among variables, latent variables, education or above. and error variables in the model, and examines the direct and indirect effects of independent variables Table 1: Individual characteristics of sample households Number of Proportion on dependent variables. It is a confirmatory Item Category samples (%) analytical method. Because the relationship among male 820 68.85% herdsmen’s human capital, family’s economic Gender level, and relationship network are complex and female 371 31.15% difficult to measure directly, this paper selects the 20-30 88 7.39% structural equation model for analysis to improve 31-40 183 15.36% the accuracy of the estimation results. Age (years) 41-50 391 32.83% 50-60 356 29.89% (iii) Sources of Data >60 173 14.53% The data used in this paper comes from the No formal 128 10.75% pastoral livelihoods survey conducted by the Inner education Mongolia Institute of Rural Pastoral Development in Educational basic 240 20.15% 2016 and 2017. The questionnaires include various level primary 502 42.15% topics such as infrastructure and environment, higher 267 22.42% economic activities, family wealth status, family dynamics, and population migration in pastoral college 54 4.53% areas. The survey samples cover 10 husbandry banner counties in the four ethnic regions of Inner Of the 1191 pastoral households that met the Mongolia, Ningxia, Xinjiang, and Gansu. The borrowing requirements, 711 herdsmen eventually sample size of the surveyed herdsmen is 1,321 obtained loans, and the effective borrowing rate households, 130 invalid samples were removed, was 59.7%. Among them, there were 435 herdsmen and 1191 effective samples are being used as study borrowing through formal channels, 173 herdsmen objects. obtaining loans, and the effective borrowing rate was 39.8%. 756 shepherds borrowed through (iv) Descriptive Statistical Analysis of informal channels, 535 herdsmen obtained loans Samples and the effective borrowing rate was 70.8%. The The survey results show that among the 1191 above situation shows that due to the lack of the sample herdsmen, males account for 68.85% and herders’ own conditions and the high risk of females account for 31.15%. This shows that the agricultural and husbandry production, it is difficult principals of the herdsmen households are still to meet the loan conditions of the formal financial dominated by men; the middle-aged and old institutions. The convenient, simple and informal herdsmen of the interviewees are the majority, way of financing has become the herdsmen’s main those under 40 only account for 22.75%, and borrowing channel, thus promoting the economic 77.25% of the respondents are over the age of 51. development of pastoral areas. The specific study The young and middle-aged in the pastoral areas are case is shown in Table 2.

Table 2: Statistical description of pastoral households’ lending channels Lending Number of Number of herdsmen Effective loan Category channels samples obtained loans rate formal Banks 272 109 40.07% channels Non-bank financial institutions 163 64 39.26% Relatives 370 282 75.68% informal Friends 290 198 68.28% channels Private lending institutions 96 49 51.04% 192 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

(v) Variable Measurement and Inspection 2. Reliability and Validity Test The reliability and validity test of the survey 1. Variable Measurement data were analyzed by spss19.0 software. The (1) Human capital. This article refers to reliability test uses Cronbach’α coefficient. When Qinghua Chen’s (2017) description of the rural the Cronbach’α is greater than or equal to 0.7, the households’ age, educational level, and out-of- reliability was higher. The Cronbach’αof all latent town employment experiences[13]. variables in this paper is 0.852, the variables have (2) Family economic level. This article uses good reliability. Validity test uses the KMO and the family’s income over the past year, deposits, Bartlett sphere test to inspect whether the data and individual business experience to measure the are suitable for factor analysis. The calculation family’s economic level. results show that the KMO value is 0.890, which (3) Relational networks. The relationship is much greater than 0.5. The Bartlett’s sphere test network is an important component of social approximates the chi-square value of 3817.61. capital. The relationship network formed by trust, It passed the test at a significant level of 1%, reciprocity, and norms can improve the financing indicating that it is suitable for factor analysis. Then environment of herdsmen by promoting cooperation. the factor loading of each measurement index on its This article refers to the communication among latent variable is calculated by factor analysis and relatives, neighborhood friendliness and gift the results are all greater than 0.7, indicating that expenses mentioned in the article “Xinle Tong” the validity of the variables is good. The specific (2011) in Social Capital’s Impact on farmers’ test results are shown in Table 3. borrowing Behavior[14] to describe this concept.

Table 3: Variable Reliability and Validity Test Latent Factor Code Observation variable Cronbach’α KMO variable loading a1 Age 0.719 Human a2 Educational level 0.780 0.862 0.743 capital a3 Work experience 0.703

Family b1 Income for the past year 0.716 economic b2 Household deposits 0.812 0.846 0.817 level b3 Individual business experience 0.713 c1 Communication among relatives 0.845 Relationship c2 Neighborhood friendliness 0.738 0.901 0.915 network c3 Gift expenses 0.774 d1 Easy to borrow from banks 0.758 Formal Easy to borrow from non-bank financial 0.923 0.916 lending d2 0.734 institutions e1 Easy to get loans from relatives 0.765 Informal e2 Easy to borrow from friends 0.801 0.907 0.904 lending Easy to borrow from private lending e3 0.797 institutions SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 193

IV. EMPIRICAL RESEARCH variable of the structural model, indicating the endogenous latent variables cannot be explained by (i) Structural Equation Model Theory exogenous latent variables and other endogenous There are two basic models in the structural latent variables. equation model: the measurement model and the structural model. The measurement model consists (ii) Model Fitting of latent variables and observed variables, which is a linear function of a group of observed variables, 1. Model Fitting Test which is generally called verification factor Based on the above principles, the model was analysis. The measurement model is usually written fitted using Amos 20.0 software. Using Maximum as follows: Likelihood Estimation (ML), the absolute fitting index and value-added fitting index were used to

X = Λ X ξ +δ (1) Y = ΛYη + ε (2) evaluate the model fit. From the fitting test results of the structural equation model, we know that X represents a vector consisting of measurable the chi-square value is 175.671 and the significant variables of exogenous latent variables. Y probability p is 0.000. We reject the null hypothesis represents a vector consisting of measurable and theoretically believe that the model fit is not Λ variables of endogenous latent variables. X and good, but scholar Rigdon (1995) believed that when Λ Y are the factor loading of measurable variables using real-world data to evaluate theoretical model, (X, Y); ξ andη are exogenetic latent variables and the chi-squared statistics was usually not helpful, endogenous latent variables respectively; δ andε because chi-squared value greatly influenced by are measurement errors for latent variables. estimated parameter sample. The more parameters The structural model is a description of the that are estimated, the poorer the model fit is. At this causal relationship between potential variables. It time, the fitness of the overall model should refer is equivalent to the traditional path analysis and is to other indicators. RMSEA is 0.052, indicating generally written as follows: that the fit is good; other fitness indicators such as IFI, CFI, GFI, NFI have reached the ideal state of η = Bη + Γξ +ζ (3) fitness, only AGFI and TFI are slightly lower than the standard value, but basically does not affect the B denotes the endogenous latent variables overall model fit. The above shows that the fit of the coefficient matrix; Г expresses the exogenetic entire model is good, as shown in Table 4. latent variables coefficient matrix; ζis the disturbing Table 4: Model Fit Test Results Model Evaluation of Goodness of fit indicator Index classification Evaluation standard results results χ2 p>0.05 P≤0.000 Poor GFI >0.9 0.91 better Absolute fitting indicator AGFI >0.9 0.89 Slightly lower RMSEA <0.05 0.046 better TLI >0.9 0.97 better Value-added fitting NFI >0.9 0.94 better indicator IFI >0.9 0.95 better CFI >0.9 0.96 better 194 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

2. Model Estimation Results and Hypothesis economic level, relationship network, regular Verification lending channel, and informal lending channel are Through parameter estimation, the path obtained, as presented in Figure 2. coefficient of herdsmen’s human capital, family’s

Fig.2 Model Fitting Path

From the following results, it can be seen that the household economic level has a significantly herdsmen’s human capital has a positive effect positive direct impact on pastoral households’ on pastoral households’ formal lending, the path formal lending. Income for the past year, deposits, coefficient is 0.21, and the p-value of the path and Individual business experience reflect the coefficient is significant at the 1% level. According level of wealth of herdsmen, and the majority of to previous studies, the relationship between the herders’ requests for financing from formal age and family’s likelihood of obtaining loans financial institutions are rejected due to insufficient is inverted U-shaped, meaning that middle-aged collateral. Herdsmen lack effective mortgages and herdsmen are more likely to obtain loans (JinYe, it’s not easy for formal financial institutions to Hongbin Li,2009) [15]. Especially in formal lending, collect herdsmen’s credit, which makes it difficult age can be used as a judgment for the borrower’s for pastoral households with poor economic ability to pay debt. In addition, the education level conditions to obtain formal loans, therefore the is the best measurement of pastoral households’ hypothesis H2c is established. The path coefficient human capital. It can reflect the social capabilities of pastoral household economic level to informal and surviving ability of the herdsmen households. lending is 0.33, which passes the significant test. Therefore, the formal financial institutions prefer Hypothesis H2d is established. the higher educational group, which validates the The path coefficient of pastoral households’ previous hypothesis H2a. The path coefficient of relationship network to formal lending is 0.86, which human capital to informal lending is -0.08 and means when other conditions are established, the doesn’t pass the significant test. This is probably relationship network variable is increased by 1 unit, because relatives and friends do not pay attention and the probability of herdsmen obtaining formal to the risks posed by pastoral households on the lending increases by 0.86 units. Communication use of funds in human-oriented pastoral China. among relatives, neighborhood friendliness and Hypothesis H2b has not been verified. gift expenses can reflect the “quantity” of the The path coefficient of pastoral households’ relationship network of pastoral households family economic level to formal lending is 0.61, and can be used as a substitute or guarantee for the p-value is less than 0.01 and that is to say, mortgage loans for herdsmen. The path coefficient SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 195 of the pastoral households relationship network of people have different economic levels, and to informal lending is 0.61, which passes the people’s social resources and social relationships significant test. In the pastoral areas of China, the are different. Hypothesis H3b is verified. Therefore, economy is underdeveloped and communication it can be induced that the herdsmen’s human capital is difficult. Herdsmens life circle mainly involves and family economic level will indirectly affect relatives and neighbors, and long-term friendly the herdsmen’s knowledge and choice of lending exchanges have formed a stable trust relationship, channels through the intermediary variable, which which affects informal lending. Hypothesis H2e is is likely to be stronger than the direct effect of the verified. two on herdsmen’ lending channels. The path coefficient of herdsmen’s human To sum up, it can be concluded that there are capital to the relationship network is 0.35, and different endowment factors and that herdsmen’ the p-value is less than 0.01, so the herdsmen’s lending channels are different. Herdsmen who human capital has a significantly positive effect pay attention to their own construction, their on the relationship network. Life cycle theory educational level, and social capabilities will believes that human life will experience different increase the availability of their loans. In the past, stages, and different social relationships will be studies have also shown that the higher the family’s formed at different stages. It can be seen that age gross income, the better the level of education for and educational level inevitably affect the quantity the household, thus promoting formal financial and quality of the social network of pastoral channels for financing. The higher the degree of trust households. Hypothesis H3a is established. The of relatives and the higher the social status of close family economic level has a significantly positive friends, the easier it is to obtain informal finance[13] . impact on the pastoral households’ relationship Therefore, hypothesis H2 is established, and thus network. The path coefficient is 0.56, and the p- hypothesis H1 is also established. The hypothetical value is significant at the 1% level. Different classes results of this paper are shown in Table 5.

Table 5: Model Hypothesis Test Results Standardized Relationship path Hypothesis P-value conclusion path coefficient Human capital → Regular lending channels H2a 0.21 *** support Human capital → Informal lending channels H2b -0.08 *** Not support Family economic level → Formal lending channels H2c 0.61 *** support Family economic level → Informal lending channels H2d 0.33 *** support Relationship network → Regular lending channels H2e 0.86 *** support Relationship network → Informal lending Channels H2e 0.65 *** support Human capital → Relational network H3a 0.35 *** support Family economic level→ Relational network H3b 0.56 *** support Note: *** indicates p≤0.001

V. CONCLUSIONS AND effect on informal lending; family economic level IMPLICATIONS has a significant impact on formal lending and Based on the survey data of 1191 pastoral informal lending, and it is more advantageous for households, this paper constructs a structural herdsmen to obtain formal lending than informal equation model to analyze the impact path and the lending; herdsmen’s relationship network has a mechanism of pastoral households endowments on significantly positive effect on herdsmen’ s access their financing channels. The results of the study to formal lending and informal lending. In addition, show that rich endowments have a positive impact herdsmen’s human capital and the family economic on herdsmen’ access to loans, and that the more level have a strengthening effect on the herdsmen’s abundant human capital herdsmen have, the easier it relationship network, and indirectly affect the is to obtain formal lending, but it has no significant herdsmen’s lending channels. 196 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

According to the research conclusions of this REFERENCES article, the following policy recommendations [1] Lin Lu. Study on the Influence of Family can be put forward: Firstly, the understanding and Endowment on Farmers’ Loan Behavior - exchanges between various lending entities should Based on the 2012 China Labour Dynamic be continuously strengthened, the information Survey Data (CLDS) [D]. Southwest advantages of informal finance should be fully used, University of Finance and Economics, the trust mechanism that depends on the relationship 2016. network in private lending and formal lending [2] Daihui Si. Empirical research on the should be used. Secondly, it’s not easy for those influence of farmers’ differentiation and pastoral households with lower incomes and lower social capital on lending behavior - A case education levels to obtain formal loans. Through study of Hengshan District, Yulin City[D]. increasing expenditures on modern technology Northwest A&F University, 2017. training for herdsmen, herdsmen should be guided [3] Glass. D. V. Social Mobility in Britain. to develop science and technology husbandry so as London: Routedge & Kegan Paul Edition, to increase their income. Thirdly, because of the 1954 great differences in endowment factors of pastoral [4] Maria C. Pereira; Filipe Coelho; Óscar households and the various demand for loans , Lourenço.Who Feels Credit Constrained the method used to provide financial products that in Europe? The Role of Social Capital[J]. are suitable for pastoral realities and herdsmen’ 2017(8):380-405. needs through innovation will greatly increase the [5] Xiangzhi Kong, Songhai Fang, Xiaopeng practical effect of poverty alleviation and poverty Pan, Jiujie Ma. Analysis of Influence of reduction. Lastly, the establishment of a pastoral Farmers’ Endowment on the Adoption of asset mortgage market should be actively explored, Agricultural Technology in the Western formal financial institutions should be encouraged Region [J]. Economic Research, 2004(12): to establish a value appraisal system for pastoral 85-95. asset collateral, farmland ownership should be [6] Zhilei Shi, ChiYu. Research on Family vigorously promoted, and the herdsmen’s formal Endowment, Human Capital and Women’s credit availability should be improved . Employment Flow in Urban and Rural Areas--Urban and Rural Survey Data from Declaration of conflicting interests Hubei Province[J]. Agricultural Economic The authors declare that there is no conflict of Issues, 2011(12):81-90. interests regarding the publication of the paper. [7] Zan Yang; Ying Fan; Jing Wu. Informal Borrowing and Home Purchase: Evidence Acknowledgement from Urban China[J]. Regional Science The research is supported by the Inner and Urban Economics, 2017. Mongolia Science and Technology Department Soft [8] George Okello Candiya Bongomin; John Science Project of China (201505047) and Inner C. Munene; Joseph Mpeera Ntayi; Charles Mongolia Institute for Rural Development of China Akol Malinga. Exploring the mediating (201801001). We would like to express our sincere role of social capital in the relationship gratitude to the organizations mentioned above. between financial intermediation and financial inclusion in rural Uganda[J]. Source and availability of Data 2018:829-847. The data used in this paper comes from the [9] BeIl.C.Interaction between institutional pastoral livelihoods survey conducted by the and informal credit agencies in rural Inner Mongolia Institute for Rural Development India[J].World Bank Economic Review, at Inner Mongolia Agricultural University in 1990(3):297-327. 2016 and 2017. The data used in this paper is [10] Aleem, I. Imperfect information, available to the public. screening, and the costs of informal lending: A Study of a rural credit market in SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 197

Pakistan. World Bank Economic Review, [17] Cindy-Ann Bryant and Doug Norris. 1990(3): 329-349. Measurement of Social Capital: The [11] Duong and Izumida. Rural Development Canadian Experience [J]. Statistics Finance in Vietnam: A Microeconometric Canada, 2002.08. Analysis of Household Surveys. [J]. World [18]Burt R. structure Holes: The Social Development, 2002. Structure of Competition[M]. Harvard [12] Tho Pham; Oleksandr Talavera. University Press, 1992. Discrimination, Social Capital, and [19]Coleman, James. Social Capital in the Financial Constraints: The Case of Creation of Human Capital[J]. American VietNam[J]. World Development, Journal of Sociology.1998. 2018:228-242. [20]Granovetter M. .The strength of weak [13] Qinghua Chen.The Impact of Village ties.[J]. American Journal of Sociology. Development Mutual Aid Funds on Vol.78.1973. Farmers’ Agricultural Production [21]Bourdieu, P. “The Forms of Capital”in Investment and Income - Based on John Richardson. Research for the Empirical Evidence from 655 Farmers in 37 Sociology of Education[M]. New York: Poor Villages in 13 Counties in Ningxia[J]. Greenwood Press, 1986: 241-258. Journal of Nanjing Agricultural University [22]Jame Coleman. Social Capital in the (Social Science Edition), 2017(04):138- Creation of of Human Capital[J]. American 146. Journal Journal of Sociology, 1988 (94): [14] Xinle Tong, Baojin Chun, Xiangyang 98. Yang. An Empirical Study on the Impact of [23] Pal, Sarmistha. Household sectoral choice Social Capital on Farmers’ Loan Behavior - and effective demand for rural credit in Based on Survey Data of 1003 Households India[J]. Applied Economies, 2002 (14): in Eight Provinces[J]. Financial Research, 1743-1755. 2011(12):177-191. [24]Jing Ma, Meiling Zhu. Empirical Analysis [15] YeJin, Hongbin Li. Informal Finance and on Characteristics of Herdsman Credit Farmers’ Borrowing Behavior[J]. financial and Influencing Factors - Based on Field research, 2009,(4):63-79. Investigation in Yili District of Xinjiang[J]. [16] Wendy Stone. Measuring social capital[J]. Arid Land Geography, 2016(2):443-450. Research Paper No.24, 2001.02 198 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 199

POSTER PRESENTATIONS 200 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

METHODS TO INCREASE EFFECTS OF AGRICULTURAL SECTOR TO THE GENERAL EQUILIBRIUM OF THE ECONOMY

Tumendemberel.G, MSc Erdenebayar.M, Ph.D Nyambat.L, Sc.D School of Economics and Business, Mongolian University of Life Sciences , Email:[email protected]

INTRODUCTION CONCLUSION Main role of the mathematics analysis of 1. In view of the current situation of general economy is to express equilibriums of nature- equilibrium in the economy, in 2016 society-economy by mathematics equations, Mongolia produced 42.0 trillion tugrug solving them into systems and finding solutions. worth of products, of which 55.8% (23.4 There are several reasons to divide this trillion) was increased value added, or thesis into 2 parts namely mathematics analysis of GDP. In 2002-2016, the population grew total production and mathematics analysis of end by 1.66% per year, and GDP increased consumption (Gross Domestic Product). by 10.25%, and GDP per capita increased Resource that formed in the result of connection by 8.59% per year, reaching 7.48 million between sectors and managed purchasing between tugrug in 2016. Our economic growth them is called as an intermediate consumption. For rate is estimated to be trillions, which is a example: leather is resource that herder man formed witness of the economic boom. The total and it becomes raw material of manufacturing sector agricultural production grew by an average in the result of management system. Processed of 6.1% per year in 2002-2016, while the leather becomes raw material of manufacture of agricultural labor productivity increased leather clothes and boots. Ready leather clothes and 8.2% and the labor force declined 1.4%. boots are end consumer’s products (GDP) and they 2. Component of production inputs, structure approach end users by marketing system. While and ratio are an important indicator of GDP of Mongolia was 23.4 trillion tugriks, gross the state of equilibrium in the economy. production of sectors was 42.0 trillion tugriks. According to our survey, 14.3% of total If the rate of domestic products in sector input is production inputs are wages, 4.8% are high, it means that technological system and system used capital, 4.9% are tax, 31.9% are profit, interconnection of that product are good. Especially, mixed income (uncertain resources: land, to produce high quality car in any foreign country, land and water, forest, air etc.) 32.1% are a number of small and medium enterprises provide inputs from other industries (domestic raw their parts. Information of products quality between materials and raw materials), 12.0% are sectors becomes main role to move economy imported products (raw materials and raw forward. It is called as system feedback. materials). As a result, 14.3% of the total cost of production is live labor, 3.8% is the METHODOLOGY AND main capital gains, 48.7% is the material ANALYSIS OF DATA cost, and 32.1% is the mixed income. To solve generic equilibrium model, input and 5.9% of agricultural sector is wage, 0.9% output model of Leontief and Walras model are is used capital, 3.7% is import product basely used. Equilibrium analysis of Leontief is the input and 45.6% is mixed value. In other analysis method that studies any economic structure words, most sectors of our economy show as a whole and generally. Leontief made analysis that the production capacity is high. about how much production the sectors could do in 3. The composition and quality of production order to provide demand of the total production in output an important role in maintaining the his model of inter sectorial equilibrium. equilibrium of the economy. In Mongolia, 23.2% of total production output in SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 201

Mongolia is household consumption, with the accumulation of 8.79% increases. 8.0% is government consumption, 11.7% 6. Improved technology for agricultural is savings, 25.0% is exports and 32.1% is product recycling and export-oriented used by sectors. 20.3% of the agricultural scenarios will have a direct impact on sector is household consumption, 27.9% the overall production and GDP, and will is savings, 9.3% is exports and 42.5% make a positive trend in the economic is intermediate consumption of sectors. structure. As the agriculture sector From a development point of view, the consumes less imported materials and raw overall yield is the dominant percentage of materials, the share of imported materials final and intermediate consumption, and decreases by 0.5 percentage points, which the lower the accumulation level is not a in turn reduces absolute growth. The positive trend. share of domestic production materials 4. Growth in household consumption has led increased by 1.5 percentage points or to a rise in unit price or inflation, which 2008.6 billion tugrug. The proportion of has negative impact on the livelihoods of mixed income increases by 0.1 percentage the population. In 2002-2016, household points or 1330.3 billion tugrug due to the consumption grew by 8.37% per annum, fact that households in the livestock sector consumption per household of 17.9 dominate and are not regarded as separate million tugrug and per capita consumption wages. As a result of these and other reached 5.1 million tugrug, but the increase changes in utilization of primary reserves, in price of goods and services was mainly new value-added GDP share has increased due to this increase. 92.5% of the change by -0.8 points or 1902.0 billion tugrug in household consumption is attributable by the state. Therefore, it is particularly to the growth of consumer goods and important to increase the cost of raw services, and only 7.5% is dependent on materials and products in our traditional the growth of household income, which agriculture, including the livestock sector, illustrates the negative impact of inflation to diversify Mongolia’s economy into on the livelihood of the population. In a multi-pillared dependence on single 2002-2016, the household consumption of mining. agricultural sector grew by 7.7% a year, 7. Considering total consumption of products the consumption of one household was 3.7 of 46.1 trillion tugrug at the national level, million tugrug and the consumption per the share of final consumption increased capita was 1.1 million tugrug. by 0.5 by 3.0 points or 3.0 trillion 5. Loan interest rates, investment and savings tugrug while the share of intermediate ratios are important for economic growth. consumption increased by 1526.5 billion In 2002-2016, investment grew by 10.8% tugrug. Among the final consumption annually, especially during the period from types, the share of exports increased by 2008 to 2012, in the mining sector, and in 4.3 points or 3.0 trillion tugrug. 2011-2014 more than in construction sector 8. If the available resources are fully utilized, and accumulation. As a result, capital the share of agricultural production in inflow increased by 14 times over the year the total industry is greater than 13; the of 2002, reaching 71.6 trillion tugrug. One proportion of agricultural sector in GDP of the key factors for investment is the can be no less than 18-19, which will have interest rate (Solow model). Interest rates a positive overall economic imbalance. have declined by 1.09 points annually 9. According to the model of the use of from 2002 to 2016, and the loan policy primary reserves, the urban population is has to be implemented in real terms and 2047975, the rural population is 1012025, reduced interest rates further. The bank’s the number of pasture animals is 42709.8 annual interest rate decreases by 1 point, thousand (camel 363.5, horse 3255.0, cattle 202 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

3571.1, sheep 18485.8 and goat 17034.4 was 1252.9 thousand tugrug, one ha for thousand) the number of livestock is pastureland is 31.6 thousand tugrug and 1678.9 thousand heads and the crop sector 44.4 thousand tugrug per cubic meter. is 933.5 thousand hectares (wheat 385690 Based on the annual evaluation, the hectares, 12535 potatoes, 8196 vegetables, complete evaluation of compensation for 1,6656 herbs, 19285 crops, 19695 grasses, one-hectare land is 54.3 million tugrug; 419438 crops, 73884 hectares) 4.7308 one hectare of hayfields is 127.8 million trillion tugrug. tugrug and one hectare to 3,233 million 10. It is necessary to establish a scientifically tugrug. sound assessment of the current state of 950,000 hectares of farmland, 350 thousand the soil for the production of renewable hectares of hayfields, 120 million hectares of natural resources, which is a renewable pastureland and 398.4 million cubic meters of water natural resource. According to our were used for populace and agricultural purposes. analysis, the annual assessment of the This resource is valued at 4.7485 trillion tugrug for one hectare was 532.5 thousand tugrug, the primary resource estimate. the annual assessment for hayfields SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 203

EFFECTS OF IRRIGATION AND PLANT GROWTH PROMOTING RHIZOBACTERIA ON PROCESSING TOMATO

Bulgan Andryei1 M.Sc, Kitti Zsuzsanna Horváth1 M.Sc, Dr. Zoltán Pék 1, Dr. Eszter Nemeskéri1, Dr. Andras Nemenyi1, Prof. Lajos Helyes1

1Szent Istvan University [email protected]

Abstract The effects of plant growth promoting rhizobacteria (PGPR) bio-fertilizer on the yield, water use efficiency, and dry matter content of processing tomato were investigated, under three different irrigation regimes. The open field experiment was carried out in randomized block design with four replications for each treatment in 2017. The water supply conditions were the follows: rain-fed control (I0), deficit water supply (I50), and optimum water supply (I100), which was delivered by drip irrigation in accordance UG812J

F1 processing tomato hybrid. The average soluble solids content (SSC) of the treatments ranged from 3.08 to 3.65 ºBrix. The vitamin C content production varied between 1.3 kg h-1 to 3.8 kg h-1. The ratio of non-marketable berries in non-irrigated treatments was higher than in irrigated treatments. Irrigation had a positive effect on yield, such as Brix yield and vitamin C yield. However, the PGPR treatment had an opposite effect on these parameters. A close positive correlation was found between the water use efficiency (WUE) and the SSC yield.

Keywords Irrigation, rhizobacteria, tomato, Brix.

INTRODUCTIONS relative constant for a given crop under a given The tomato is considered one of the most climate (Patanè et al., 2011). WUE expresses the important vegetable crops in the world. This crop efficiency of water in plant production (Patanè has high water needs so it is necessary to develop & Saita, 2015), which may contribute to saving growing strategies to optimize the efficiency of irrigation water (Parry et al., 2005). water use and maintain the yield and its quality Plant growth promoting rhizobacteria (PGPR) (Nagare et al., 2016). Irrigation water has a negative have many beneficial effects on the soil environment effect on soluble solids content (SSC) (Pék et al., (Adesemoye et al., 2008). They involve various 2014). Drip system irrigation method can causes biotic activities of the soil ecosystem to make it water stress to plants, if the yield reduction is lower powerful for nutrient turnover and sustainable for than the benefit derived from the water savings or crop production (Bhardwaj et al., 2014). It was from quality improvement (Johnstone et al., 2005; discovered, that applying bio-fertilizers as seed Pék et al., 2017). The effects of deficit irrigation or soil inoculants, leading microorganisms to vary depending on seasonal weather conditions and multiply and participate in nutrient cycling, which affect crops differently; it is also influenced by soil benefited crop productivity (Singh et al., 2011). It (Helyes & Varga, 1994). The most common water was stated that PGPR is a useful tool for enhancing deficit applied is 50% of evapotranspiration (Bakr phytochemicals in tomato (Sabin et al., 2017), et al., 2017), that can be used in different vegetative especially under stressful conditions (Ruzzi & stages (Kuşçu et al., 2014b; Nangare et al., 2016), Aroca, 2015). The dry matter content of fruit is one or simply terminating irrigation for the duration of the most important parameters of the processing of various phenological stages (Johnstone et al., tomato, however it has been influenced by seasonal 2005; Lei et al., 2009; Kuşçu et al., 2014). Water variations (Helyes & Varga, 1994). use efficiency (WUE) is expressed by the ratio of The aim of this study was to establish the the yield to amount of water in processing tomato effects of bio-fertilizer on processing tomato

(Battilani et al., 2009) and it can be considered a UG812J F1 under three different irrigation regimes 204 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 with late-planting. Plants treated with bio-fertilizer Regression analysis was performed to reveal the at the time of planting were evaluated for total relationship between the ºBrix of yields and WUE. biomass, yield, fruit phytonutrient production, and water use efficiency. Irrigation water has a negative RESULTS effect on water-soluble dry matter content (Pék et The largest berries were obtained with al., 2014). plants with bio-fertilizer treatment of 50% water supply, but it was not significantly different from STUDY METHODS AND MATERIALS control and optimal water supply management. In 2017, open field experiments were conducted The bio-fertilizer had no difference between the by the Institute of Horticulture in experimental farm irrigation control plots. The bio-fertilizer reduced of Szent István University, Gödöllő, Hungary. The the number of berries in all three water supplies, examined processing tomato was UG812J F1 hybrid but this difference is not significant. However, distributed by Orosco Kft. (United Genetics Seeds statistically it can be verified that water supply Co., Hollister, California, USA). It is a middle-aged increased the number of harvested fruits, but the growing season, and good stress tolerance. difference between the two irrigated treatments is Seedlings were inoculated with 1% liquid not significant either this time. solution of the bio-fertilizer with a drip irrigation In the aggregate mean of treatment system before planting out. The experiment was combinations, marketable yield reached 48% more, carried out in randomized complete block design in which was significantly higher. The proportion four replications. The date of transplantation was of green berries is also higher than expected, an June 15th and the harvest date was September 27th in average of 17%, which is the result of late planting. Hungary these times are later than usual. Overall, the °Brix results varying between 3.08 and There were two different irrigation regimes 3.65 are not acceptable, resulted lower SSC yield (I), based on ETc: ETc×Kc, meaning optimum as usual. The use of the bio-fertilizer in each of water supply (I100), and half of this, deficit irrigation the three irrigation regimes decreased the soluble

(I50) was compared with an unirrigated, rain-fed solids yield. The positive effect of irrigation is also control (I0). Each treatment was performed in 4 supported by the following correlation with the replications, and 10 plants were harvested in each. correlation between yield and Brix yields. Higher At the time of harvest, the total biomass and yield yields resulting from irrigation also generate higher were recorded, then the yield was classified to the yields of soluble solids content. marketable (ripe), and green and non-marketable The highest value was achieved by deficit (cracked and diseased) fruits and measured the water supply treatment, barely ahead of irrigated yield. control. The bio-fertilizer reduced the vitamin C The bio-fertilizer was a product of the content in all three treatment. Biotechnology Division (BAY-BIO) of the Bay The accumulated precipitation at the site Zoltán Applied Research Nonprofit Ltd. (Szeged, of the experiment was 328 mm in the summer of Hungary). 2017, which is considered sufficient for tomato. Analytical investigations were done at the 50% treatment gave 52 mm, 100% treatment gave Regional University Knowledge Center at Szent 110 mm irrigation water during the experiment. We István University. The amount of vitamin C was found a very close positive (R2=90%) correlation determined using a Hitachi Chromaster high- between WUE and SSC yield (standard error 0.09). performance liquid chromatograph (HPLC) (Hitachi, Tokyo, Japan) instrument according to previous study (Pék et al., 2010). Fruit soluble solids content (°Brix) was determined by a digital manual refractometer KRÜSS DR201-95 (KRÜSS Optronic, Hamburg, Germany) after homogenization of the samples. The data were evaluated by ANOVA. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 205

CONCLUSIONS Hsiao, E. Fereres, & D. Raes (Eds.), Crop The irrigated stocks proved to be better in yield response to water FAO irrigation and terms of yield, berry weight and berries. drainage paper 66. Food and Agriculture The experiment has shown that water supply is Organization of the United Nations. only one of the factors influencing the economical 6. Bhardwaj, R., Ohri, P., Kaur, R., Rattan, processing tomato production. The bio-fertilizer is A., Kapoor, D., Bali, S., Kaur, P., Khajuria, still in experimental stage, so it would be advisable A., & Singh, R. (2014). Gene Silencing. to use a nutritional treatment supplement to increase 209–228. In: P. Ahmad & S. Rasool (Eds.), dry matter yield. This is not the case for all types of Emerging Technologies and Management practice, but the UG 812J can be sustained for a of Crop Stress Tolerance. Vol. 1. Elsevier longer period of time and weather can significantly Inc. influence it. 7. Helyes, L., & Varga, G. (1994). Irrigation There is a close positive correlation between demand of tomato according to the results the yield and the SSC yield. It can be stated that of three decades. Acta Hortic, 376, 323- the two parameters are significantly related. The 328. amount of dry matter content and the amount of 8. Johnstone, P.R., Hartz, T.K., LeStrange, fruit is greatly influenced by the correct choice of M., Nunez, J.J., & Miyao, E.M. (2005). harvest time and the date of finishing irrigation. Managing fruit soluble solids with late- Overall, late planting and the irrigation season deficit irrigation in drip-irrigated have strongly influenced the crops. Based on the processing tomato production. 40, 1857- experiences of previous experiments we assume that 1861. the maximum potential of microbial preparations 9. Kuşçu, H., Turhan, A., & Demir, A.O. could be utilized when the plant is exposed to (2014b). The response of processing environmental stress. tomato to deficit irrigation at various phenological stages in a sub-humid REFERENCES environment. Agric. Water Manag., 133, 1. Adesemoye, A.O., Torbert, H.A., & 92–103. Kloepper, J.W. (2008). Enhanced plant 10. Kuşçu, H., Turhan, A., Ozmen, N., Aydinol, nutrient use efficiency with PGPR and P., & Demir, A.O. (2014a). Optimizing AMF in an integrated nutrient management levels of water and nitrogen applied system. Can. J. Microbiol, 54, 876-886. through drip irrigation for yield, quality, 2. Adesemoye, A.O., Torbert, H.A., & and water productivity of processing Kloepper, J.W. (2009). Plant growth- tomato (Lycopersicon esculentum Mill.). promoting rhizobacteria allow reduced Hortic. Environ. Biotechnol., 55, 103-114. application rates of chemical fertilizers. 11. Lei, S., Yunzhou, Q., Fengchao, J., Microb. Ecol., 58, 921-929. Changhai,, Chao, Y., Yuxin, L., Mengyu, 3. Bakr, J., Daood, H.G., Pék, Z., Helyes, L., & Baodi, D. (2009). Physiological L., & Posta, K. (2017). Yield and quality mechanism contributing to efficient use of mycorrhized processing tomato under of water in field tomato under different water scarcity. Appl. Ecol. Environ. Res., irrigation. Plant, Soil Environ, 55, 128- 15, 401-413. 133. 4. Battilani, A., Solimando, D., Jensen, 12. Nagare, D.D., Singh, Y., Kumar, P.S., & C.R., Plauborg, F.L., Andersen, M.N., & Minhas, P.S. (2016). Growth, fruit yield Sandei, L. (2009). Water saving irrigation and quality of tomato (Lycopersicon strategies for processing tomato. Acta esculentum Mill.) as affected by deficit Hortic, 823, 69-76. irrigation regulated on phenological basis. 5. Battilani, A., Prieto, H., Argerich, C., Agric. Water Manag., 171, 73-79. Campillo, C., & Cantore, V. (2012). 13. Parry, M.A.J., Flexas, J., & Medrano, Tomato. 192-198. In: P. Steduto, T. C. H. (2005). Prospects for crop production 206 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

under drought: Research priorities and Amsterdam, 196, 124-134. future directions. Ann. Appl. Biol., 147, 20. Sabin, F., Tehmina, A., Riaz, H., & 211–226. Basharat, A. (2017). PGPR mediated bio- 14. Patanè, C., & Saita, A. (2015). Biomass, fortification of tomato fruit metabolites fruit yield, water productivity and quality with nutritional and pharmacological response of processing tomato to plant importance. Pakistan J. Biotechnol., 14, density and deficit irrigation under a semi- 17–21. arid Mediterranean climate. Crop Pasture 21. Sahin, U., Ekinci, M., Kiziloglu, F.M., Sci., 66, 224–234. Yildirim, E., Turan, M., Kotan, R., & Ors, 15. Patanè, C., Tringali, S., & Sortino, O. S. (2015). Ameliorative Effects of Plant (2011). Effects of deficit irrigation on Growth Promoting Bacteria on Water- biomass, yield, water productivity and fruit yield Relationships, Growth, and Nutrient quality of processing tomato under semi- Uptake of Lettuce Plants under Different arid Mediterranean climate conditions. Irrigation Levels. HortScience, 50, 1379- Sci. Hortic. Amsterdam, 129, 590–596. 1386. 16. Pék, Z., Daood H.G, Neményi, A., Helyes, 22. Selim, T., Berndtsson, R., Persson, M., L., & Szuvandzsiev, P. (2017). Seasonal Somaida, M., El-Kiki, M., Hamed, Y., and irrigation effect on yield parameters Mirdan, A., & Zhou, Q. (2012). Influence and soluble solids content of processing of geometric design of alternate partial cherry tomato. Acta Hortic., 1159, 45-49. root-zone subsurface drip irrigation 17. Pék, Z., Helyes, L., & Lugasi, A. (2010). (APRSDI) with brackish water on soil Color changes and antioxidant content moisture and salinity distribution. Agric. of vine and postharvest-ripened tomato Water Manag., 103, 182–190. fruits. HortScience, 45(3), 466-468 23. Singh, J.S., Pandey, V.C., & Singh, D.P. 18. Pék, Z., Szuvandzsiev, P., Daood, H. G., (2011). Efficient soil microorganisms: A Neményi, A., & Helyes, L. (2014). Effect new dimension for sustainable agriculture of irrigation on yield parameters and and environmental development. Agric. antioxidant profiles of processing cherry Ecosyst. Environ. 140, 339–353. tomato. Central European Journal of 24. Yildirim, E., Karlidag, H., Turan, M., Biology, 9(4), 383–395. Dursun, A., & Goktepe, F. (2011). 19. Ruzzi, M., & Aroca, R. (2015). Plant Promotion of Broccoli by Plant Growth growth-promoting rhizobacteria act as Promoting Rhizobacteria. HortScience, biostimulants in horticulture. Sci. Hortic. 46, 932–936. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 207

CASHMERE COLOR, QUALITY AND ECONOMIC EFFICIENCY /IN EXAMPLE OF ZALAAJINCT-EDREN BREED/

Yo.Dorjbat (Ph.D1), N.Nyamaa (PhD)2

1 Lecturer of School of Animal husbandry and Biotechnology, MULS Email: [email protected] 2 Lecturer of School of Economics and Business, MULS

Abstract Goat cashmere is one of the high-valued and competitive products that the Mongolian agricultural sector offers for export markets. Among the others, white cashmere is cheaply processed because no additional coloring is required and this makes this type of fiber extremely high demanded as non-allergic to humans. Breeding activities for creation of, and use as improver of, “Zalaajinst-Edren” breed, specifically focused on genetic traits and profitability, have been resulted in establishing a herd of 1 million goats producing 350-400 tons of white fine cashmere in the Gobi region, annually. The study represents a first attempt to investigate the economic indicators such as outputs, price, income, profit, marginal income and quality of “Zalaajinst-Edren”, a white goat breed. As 2-3 folds increase of the volume of naturally white coloured cashmere than before, results more finished products. Thus, it favours the growth in export earnings accomplished with increased standard of living of herders and strong competitiveness of Mongolian cashmere products in the world markets. Keyword: Goat herd growth, cashmere color, cashmere quality, marginal income and profit

INTRODUCTION Objectives: To look at economic indicators Rationale: The fiber color is one of basic as such cashmere production, marketing, price, quality patterns of goat cashmere. As usual, raw quality, and income and profits in relation with goat cashmere is colored as white, whitish and brown, her growth patterns, herd composition and breed which are toughly correlated with the body color of attainment. goats. Selection of goats by body color in Mongolia had launched by mid 1980s, which resulted in the MATERIAL AND METHODS creation of several breeds and strains producing Goats of the ZJE breed in Shinejinst and white cashmere. Among these, the population of Bayan-Undur soums were chosen as the represent Zalaajinst-Edren goat breed (hereinafter as ZJE) population for studies of color, yield, quality, price diverges with its’ exclusive white-colored fiber. and profit. The population approved by a decree In connection with expansion of pedigree strategy # А-59, of the Minister of Food, Agriculture and to raise goats with white cashmere, issues related Light Industry in 2015 as the white cashmere ZJE to the cashmere market and prices emerge to be breed based on the unique quality of cashmere looked at. under the Gobi conditions [2]. Significance: This work is inventive that it attempts to compare with native goats and validate RESULTS the economic indicators such as in example of ZJE Population size growth and goat body color: breed. As the economic and social significance of The national herd of goats has been continuously this work is referred, breeding goats for white fiber growing over the last 5 years reaching 27.5 adds quantity of white and whitish cashmere, and million heads by the end of 2017, whereas goats in promotes outputs of fine quality of final products Bayankhongor aimag were counted for 2.7 million and export of cashmere goods. This unavoidably as to share 10% of total goatherd. strengthens the competitiveness of Mongolia cashmere products at international markets. 208 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Table 1. Growth patternsTable of 1. ZJE Growth population patterns of ZJE population Indicators 2013 2014 2015 2016 2017 Average Total goat number in MongoliaIndicators /million/ 19,2201322 201423,5 201525,5 201627,3 201723,5 Average TotalTotal goat goat number number in Bayankhongor in Mongolia aimag /million/ /million/ 1,919,22,1 22 2,3 23,52,6 25,52,7 27,3 2,3 23,5 TotalPresentage goat number in total in goats Bayankhongor of Mongolia aimag /million/ 9,7 1,9 9,7 2,1 9,8 2,3 10,1 2,6 10 2,7 9,9 2,3 Total Presentage goat number in total in the goats Gobi of rigion Mongolia /thous. head/ 8599,7 989 9,7 1068 9,8 1186 10,11261 10 1072,6 9,9 PresentageTotal goat in total number goats in of the Bayankhongor Gobi rigion aimag /thous. head/ 46 85946,2 989 46,1 106846,2 118646,2 126146,1 1072,6 TotalPresentage goat number in total of white goats color of Bayank /thous. hongorhead/ aimag 607 46 698 46,2754 46,1837 46,2890 46,2 757,246,1 PresentageTotal goat in total number goats of of white Gobi rigioncolor /thous. head/ 70,7 60770,6 69870,6 75470,6 83770,6 890 70,6 757,2 of that TotalPresentage goat number in total of ZJE goats breed of Gobi/thous. rigion head/ 150,670,7185,7 70,6255,1 70,6312,6 70,6316,9 70,6 244,2 70,6 Presentage in total goats of ZJE breed 24,8 26,6 33,8 37,3 35,6 32,2

of that of that Total goat number of ZJE breed /thous. head/ 150,6 185,7 255,1 312,6 316,9 244,2 Total goat number in Shinejinst soum /thous. head/ 71 88,1 128,7 159,6 161,6 121,8 Presentage in total goats of ZJE breed 24,8 26,6 33,8 37,3 35,6 32,2 Total goat number in Bayan-Undur soum /thous. head/ 79,6 97,6 126,4 153 155,3 122,4 Total goat number in Shinejinst soum /thous. head/ 71 88,1 128,7 159,6 161,6 121,8 46.2Total Percent goat of number goats arein Bayan-Undur found in Shinejinst, soum /thous. Bayan-Undur head/ 79,6 soums 97,6 where 126,4 the 153nucleus 155,3 herds 122,4are, Bayan-Undur, Bayangobi, Bayanlig, Bodg, Jinst, has grown by 47.5% in the last 5 years and hit Baatsagaan46.2 Percent and of Bayantsagaangoats are found soums, in Shinejinst, where Bayan-Undur,316.9 thousand Bayangobi, in numbers. Bayanlig, The growth Bodg, of Jinst, goats, a Baatsagaancrossbreeding and schemeBayantsagaan with ZJEsoums, breed where has a crossbreedingincluding ZJE scheme breed shallwith beZJE seen breed as a resulthas been of the beenconducted. conducted. The Thewhite-colored white-colored goats goats make makealmost 1/3increased or 70.6% demand of all for goa hights inquality these cashmere,soums. The and almostpopulation 1/3 or of 70.6% ZJE breedof all ingoats Shinejinst in these and soums. Bayan- Undurthe needs soums of herders where in the more nucleus income herds and increaseare, has in grown by 47.5% in the last 5 years and hit 316.9 thousand in numbers. The growth of goats, including The population of ZJE breed in Shinejinst and farm-gate cashmere prices, etc. ZJE breed shall be seen as a result of the increased demand for high quality cashmere, and the needs of herders in more income and increase in farm-gate cashmere prices, etc.

16 14.2 14 13.3 12.2 12.5 11.5 12 11.3

10 14.7 12.7 11.1 11.5 12.4 13.8 8 10.56 11.9 10 10.2 10.4 10.3 6 13.8 14.7 12.54 10.3 11.5 12.4 4 12.1 10 10.1 10.3 10.5 10.6 2 0 2013 2014 2015 2016 2017 Average

Mongolia Bayankhongor aimag Gobi rigion White color Zalaajinst-Edren breed

FigureFigure 1.1. GoatGoat herdherd growth, growth, percent, percent, 2013-2017 2013-2017

Income earning: Calculation of annual income with the use of method developed by Yu.Adiya, reveals thatIncome a goat ofearning: ZJE breed Calculation accounts for of 53.0 annual thousand for MNT, 53.0 whichthousand seems MNT, higher which by 24.9%seems comparedhigher by to native goats. income with the use of method developed by 24.9% compared to native goats. Yu.Adiya, reveals that a goat of ZJETable breed 2. accounts One goat's income, /million ₮/ Mongolian breed ZJE breed Altai red breed Ulgii red strian Table1000 2. One goats' goat’s income, income, /thous. /million �/ ₮/ 39,8 53 49,3 44,4 Casmere 24,3 24,3 23,1 14,2 Mongolian breed ZJE breed Altai red breed Ulgii red strian

1000 goats’ income, /thous. ₮/ 39,8 53 49,3 44,4 Casmere 24,3 24,3 23,1 14,2 SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 209 д. Cashmere quality and economic benefits: Д. CASHMERE QUALITY AND ECONOMIC BENEFITS: Table 3. Changes in goat body color and cashmere quality Table 3. Changes in goat body color and cashmere quality QuantityQuantity of ofof whichwhich white goats cashmerecashmere perper goat, TotalTotal cashmere, cashmere, tons tons TotalTotal YearsYears gramgram goatsgoats NativeNative ZJEZJE WhiteWhite number %% TotalTotal %% goatsgoats goatsgoats cashmerecashmere 20002000 163.8163.8 56.556.5 34.4 277277 294294 45.845.8 16.116.1 35.235.2 20052005 111.9111.9 57 50.9 298298 354354 39.639.6 20.2 20.2 51 51 20102010 119.7119.7 85.985.9 71.7 309309 375375 42.642.6 32.232.2 75.675.6 20152015 255.1255.1 214.5 84.7 324324 406406 102.3102.3 87.187.1 85.185.1

In 2000,In 2000, only 34.4%only 34.4% of total of goatstotal goatsin Shinejinst in Shinejinst and Bayan-Undur and Bayan-Undur soums soums were white,were white,whereas whereas this figure this figurehas gone has up gone 84.7% up in84.7% 2015 in indicating 2015 indicating big improve big improvementment of the cashmereof the cashmere quality andquality fiber and color. fiber color.

90,000 16,000 15,000 80,000 14,000 70,000 12,000 12,000 60,000 9,950 10,000 50,000 9,000 9,000 8,000 40,000 85,000 66,708 6,000 30,000 63,540 60,000 60,000 65,000 4,750 20,000 4,000 10,000 2,000 58,790 51,000 70,000 51,000 53,000 56,758 0 0 2012 2013 2014 2015 2016 Average ZJE breed Native goats Price difference

FigureFigure 2. Comparison2. Comparison of of totaltotal income,income, million million MNT MNT

As theAs figure the figure above above shows shows (Figure (Figure 2), white2), white cashmere cashmere was wassold sold at aat pricea price higher higher by by 4.8-12.0 4.8-12.0 thousandthousand MNT thanthan thatthat of of native native goats. goats. This This clearly clearly demonstrates demonstrates that that white, white, long long and fineand finefiber fiber of ZJEof ZJEbreed breed meets themeets demand the demand of processors of processors and consumers and consumers as well. as well.

TableTable 4. Cashmere4. Cashmere quality quality and and economiceconomic efficiency efficiency (2012-2016) (2012-2016) 2012 2013 2014 2015 2016 Average 2012 2013 2014 2015 2016 Average Number of goats 122300 150600 185800 255100 312600 205300 Number of goats 122300 150600 185800 255100 312600 205300 TotalTotal cashmere outputs, outputs, kg kg 49,653.8049,653.80 61,143.6061,143.60 75,434.8075,434.80 103,570.60 126,915.60126,915.60 83,343.7083,343.70 Average price of cashmere of ZJE Average price of cashmere 63,540 60,000 85,000 60,000 65,000 66,708 breed, per head, MNT of ZJE breed, per head, 63,540 60,000 85,000 60,000 65,000 66,708 Total cashmere sale income, ZJE MNT 3,155 3,669 6,412 6,214 8,250 5,540 breed, million MNT Cashmere income per head, ZJE 25,797 24,360 34,510 24,360 26,390 27,083 breed MNT Marginal revenue, ZJE breed, 18,149 77,936 -2,853 35,396 32,157 million MNT Total cashmere sale income, 3,155 3,669 6,412 6,214 8,250 5,540 ZJE210 breed,| SCIENTIFIC million JOURNAL-AGRICULTURAL MNT ECONOMICS - 2018 Cashmere income per head, Total cashmere sale income, 25,797 24,360 34,510 24,360 26,390 27,083 ZJE breedData providedMNT in figure 6 show3,155 that an increase3,669 6,412As the total6,214 cashmere income8,250 is concerned,5,540 MarginalofZJE the breed, ZJE revenue, millionherd size ZJEMNT by one goat creates potential it is irreversibly linked with price, at which 1 kg 18,149 77,936 -2,853 35,396 32,157 breed,toCashmere earn million income income MNT from per cashmere head, higher by 27.2% as of cashmere is sold at the markets (Figure 3). As 25,797 24,360 34,510 24,360 26,390 27,083 comparedZJE breed toMNT the same change of the herd size of shown 1 kg of ZJE goat cashmere earns more - DatanativeMarginal provided goats. revenue, Likewise in figure ZJE the 6 show sale pricesthat an of increase cashmere of the 10.0ZJE herdthousand, size by meaning one goat any creates increase potential of the tooverall earn 18,149 77,936 -2,853 35,396 32,157 incomeofbreed, ZJE million goatsfrom overcashmere MNT the last higher 5 years by were27.2% always as compared high toincome the same herders change earn of the from herd cashmeresize of native is goats.made Likewise- 10-15%. the sale prices of cashmere of ZJE goats over possiblethe last 5because years were of quality always improvements high - 10-15%. only. Reviewing these figures, one can judge how cashmere quality and economic returns are directly and Data Reviewingprovided in thesefigure figures, 6 show that one an canincrease judge of th how e ZJE herd size by one goat creates potential to earn positively interrelated. cashmereincome from quality cashmere and economic higher by returns 27.2% are as directlycompared to the same change of the herd size of native goats. Likewise the sale prices of cashmere of ZJE goats over the last 5 years were always high - 10-15%. and 20,000positively interrelated. Reviewing these figures, one can judge how cashmere quality and economic yreturns = 727.7x are + 2992.9directly and positively interrelated. R² = 0.5222 15,000 20,000 y = 727.7x + 2992.9 10,000 R² = 0.5222 15,000 5,000 10,000 0 5,000 2012 2013 2014 2015 2016 Average Additional income from cashmere quality 0 Total income of cashmere, ZJE breed, million MNT 2012 2013 2014 2015 2016 Average Linear (Total income of cashmere, ZJE breed, million MNT) Additional income from cashmere quality

Figure 3.Total Interrelations income of cashmere, between ZJE cashmere breed, millionquality MNT and unit price Linear (Total income of cashmere, ZJE breed, million MNT) As the total cashmere income is concerned, it is irreversibly linked with price, at which 1 kg of cashmere is sold at the marketsFigure (Figure 3. Interrelations 3). As shown between 1 kg of cashmere ZJE goat quality cashmere and earnsunit pricemore - 10.0 thousand, meaning any increase Figureof the 3.overall Interrelations income between herders cashmere earn from quality cashmere and unit is price made possible because of qualityAs the totalimprovements cashmere only.income is concerned, it is irreversibly linked with price, at which 1 kg of cashmere is sold at the markets (Figure 3). As shown 1 kg of ZJE goat cashmere earns more - 10.0 thousand, meaning10000 any increase of the overall income herders earn from cashmere1523 is made possible because1600 of quality improvements only. 1400 8000 1131.6 932.1 1200 1523 874.6 100006000 10001600 800 550.3 1131.6 1400 40008000 600 932.1 6726.5 1200 235.9 5280.4 5282.1 874.6 400 20006000 4665.3 1000 2919.1 3118.3 3155 3668.6550.3 6412 6214.2 8249.5 5539.9 200800 40000 0 6726.5 600 235.92012 2013 20145280.4 2015 5282.1 2016 Дундаж 400 2000 4665.3 2919.1 3118.3 200 3155ZJE breed goat 3668.6 /Million / 6412Mongolian 6214.2goat /million / 8249.5Deference 5539.9 \million. \ 0 0 2012 2013₮ 2014 2015₮ 2016 Дундаж ₮ FigureFigure 4. The 4. The difference difference in in goat's goat’s cashmere prices prices (million. (million. ₮) ₮) ZJE breed goat /Million / Mongolian goat /million / Deference \million. \

₮ ₮ ₮ Figure 4. The difference in goat's cashmere prices (million. ₮)

SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 211

A comparison of the total income of ZJE and relationship of quality and color of native goats over the last 5 years indicates that cashmere fiber. earnings from cashmere of ZJE goats were high – by 874.6 million MNT. Based on this, it can be SOURCES commented that highly demandable fine quality 1. Горошенко Ю. Л. (1936) Монгольская cashmere of ZJE breed significantly contributes to коза В кн: Я. Я. Лус, Н. Н. Колесник, the increased income of goat herders. и др. Домашные животные Монголии. Тр. Монг. Комисс. АН СССР №22 DISCUSSION 2. Доржбат Ё. “Залаажинст-Эдрэн” Studies on the issues of economics, marketing үүлдрийн цагаан ямаа. УБ., 2015 and management of cashmere production previously 3. Доржбат Ё. “Некоторые показатели conducted by N.Naymaa others did not account фенотипических характеристик породы how quality improvements associated with fiber белых пуховых коз Заажинст-Эдрэн”, color affect overall profits [8]. However, current Материали международной научно- study touched upon these issues in example of ZJE технической коференции, Минск, 19-21 white goats to illustrate how the unique fiber color октября 2016 г. В 2 томах том 2 and quality are advantageous in terms of marketing 4. Dorjbat Yol and Erdenebaatar Batjargal and benefits, and significant for economic well- “Basic cashmere quality indicators of being. For example, an increase of the ZJE herd goats of Zalaajinst-Edren cashmere breed” size by one goat creates potential to earn income International Journal of Development from cashmere higher by 27.2% as compared to the Research, vol. 08, pp.19416-19419, same change of the herd size of native goats. March, 2018 5. Загдсүрэн Ё. Монгол – Амикаль CONCLUSIONS хамтарсан үйлдвэрийн “Нарийн 1. The total herd size of ZJE breed of white ноолуур” төслийн тайлан. УБ, 1997. goats in Shinejinst and Bayan-Undur 6. Мандах Б., нар. “Ямаа судлал 50 жилд”,. soums of Bayankhongor aimag shows a МААЭШХ-гийн эмхэтгэл. УБ., 2011 continuous growth to 316.2 thousand in 7. Надмид Н., Мандах Б., Доржбат Ё. 2017 indicating that herders are committed “Ямааны аж ахуй”. УБ, 2015 to raise this breed as an irreplaceable 8. Nyamaa Nyamsuren and Keun Lee income source. “Informal Economic Activities and Firm 2. The use of ZJE breed in 8 soums in the Performance in a Transition Economy: Gobi region of Bayankhongor aimag as The case of the Cashmere Industry in improver of native goats converts some Mongolia”, Seoul Journal of Economics, 70.6% of total goats in white cashmere vol 21, Number 2, 2008. population which produces 350-400 9. William H. Greene “Econometric tons of white and whitish cashmere for Analysis” (8th Edition), Stern School of domesticn and international markets. Business, New York University, 2015. 3. The sale prices of cashmere of ZJE goats 10. Шульженко И. Ф. БНМАУ-ын мал аж over the last 5 years were always high ахуй УБ., 1954, хууд. 203-212 - 10-15% as indication of inseparable 212 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

“MEASUREMENT OF THE WORK VALUES OF MONGOLIA CIVIL SERVANTS”

Erdenetuya.Ma a Professor, Management department of Mongolian University Life Science [email protected]

Munkhbat.Jb b Professor, Management department of Mongolian University Life Science [email protected]

Abstract This time, we wanted to understand of the issues to improve the of civil servants performance and affect the structure. We developed based on data 649 civil service employees from 2 provinces and 5 city district of Ulaanbaatar in Mongolia. The result indicate that the work values of Mongolia civil servants different region, which includes self-actualization, interpersonal harmony, utilitarian orientation, personal growth, comfort, stability, autonomy, and flexibility. This study to Mongolian people’s understanding of the work values and implementing policies to reduce the turnover intention.

Keywords: Work values, exploratory factor analysis, confirmatory analysis, measurement

INTRODUCTION Justice organization on the example of state owned Mongolian Law on State Civil Service began universities.. in force on the date of 06 December 1995 and Super (1970), Manhardt (1972) and Benz representatives of the implementation of for civil (2005) developed key variables that determine and servants in under with the law, their performance recognition techniques improve civil servants. will directly affect the government’s work efficiency and quality. So their job performance HYPOTHESIS directly affects the government’s work efficiency 1. A positive experience, the main forces of 6 of the and quality of life of its residents. variable work of civil servants. This research has case that the job performance 2. A positive correlation among these 6 of civil servants is affected by multidimensional factors. factors (Hongming & Jianqiao, 2011) among which the most important this is the work values of the METHODOLOGY civil servants. In addition some researches has We used determining questionnaire survey established a relationship between work values and based on the theory of researchers Super and job performance of employees and has also shown Becker (1980 We has been processing IBM SPSS that there exits significant correlation between the AMOS 24 software when 6 explanatory variables work values and performance evaluation results and 38 sub parameters structure as well as study of (Frieze, Olson, Murrell, & Selven, 2006, Locke & the work values of civil servants. Than we collected Henne, 1986, Shapria &Griffith, 1990). Fishbein 655 questionnaires, and 6 invalid questionnaires (1967) have also explained how work values not were rejected. Likert scale format completed only influence job satisfaction but also have effect questionnaire work values for civil servants. A on job performance. total of 649 responses (woman, n=512, 78.9%; Research Hegney and Plank have provided men n=137, 21.1%) were used for data analysis. detailed explanations about the mechanism of The participants, 45 (6.9%) were younger than 245 the influence process. Our researchers Uyanga years, 318 (49%) were between 25 and 38 years, (2015) conducted a study on the implementation of 241 (37,1%) were between 39 and 52 years, 44 Figure 1. Model of factors to create work value

Exploratory factor analysis

Analysis has been developed by IBM SPSS 24.0 software and check reliability variable approach in Exploratory factor analysis. This suggests that variables would be removed because of variability of less than 0.5 on SA4, CS5, CS6, CS8, CS9 item. Below Scree Plot shownSCIENTIFIC that the JOURNAL-AGRICULTURAL rest of many variables ECONOMICS in our study. - 2018 | 213

(6.8%) were between 53 and 64Figure years, 2. Scree1 (0.2%) Plot Figure 2. Scree Plot were older than 65 years of age. The total public sector including education employees 552 (85.1%) bachelor and 4.9% of undergraduate and secondary.

RESULT AND INFORMATION PROCESSING

Survey work values represented by 38 parameters to express self-actualization, interpersonal harmony, utilitarian orientation, Figure 1. Model of factorspersonal to create growth, work comfort, value stability, autonomy, and flexibility. (Figure 1 in shown)

Figure 1. Model of factors to create work value Factor analysis to be determined of the KMO 3 and Barletts test is optimal sample size of created factor. Kaiser-Meyer-Olkin (KMO) = 0.939 (>0.6); Хи квадрат = 12177.8 (p<.000) that shows a confirmedFactor that analysis there areto be possibilities determined of of the sharing KMO and Barletts test is optimal sample size factorsof created within factor.the variables Kaiser-Meyer-Olkin and that the data (KMO) were = 0.939 (>0.6); Хи квадрат = 12177.8 (p<.000) suitablethat showsfor the afactor confirmed analysis. that For there review are removed possibilities of sharing factors within the variables and 7 variablethat the and data this were is represented suitable for by the the factor following analysis. For review removed 7 variable and this is represented by the following variables before variables before Figure 3. Sample reliability Figure 3. Sample reliability

Factor analysis to be determined of the KMO and Barletts test is optimal sample size of created factor. Kaiser-Meyer-Olkin (KMO) = 0.939 (>0.6); Хи квадрат = 12177.8 (p<.000) that shows a confirmed that there are possibilities of sharing factors within the variables and that the data were suitable for the factor analysis. For review removed 7 variable and this is represented by the following variables before

Figure 3. Sample reliability

The 6 Thevariable 6 variable to express to express work values work for values 73% for 73% of the total variance. of the total variance. EXPLORATORY FACTOR ANALYSIS Reliability analysis Exploratory factor analysis RELIABILITYWe have the ANALYSIS reliability of the survey research and can be used random sampling Analysis has been developed by IBM SPSS methods. The data using relating 0.92 confidence to estimate for cronbach’s α in reliability We have the reliability of the survey research 24.0 software and check reliability variableThe 6 variableanalysis. to express work values for 73% of the total variance. Analysis has beenapproach developed in Exploratory by IBM SPSSfactor analysis.24.0 software This and and can checkbe used reliabilityrandom sampling methods. The variable approach in Exploratory factor analysis. This suggestsReliability thatdata variables analysis using relating would 0.92 confidencebe to estimate for suggests that variables would be removed becauseWe have the reliability of the survey research and can be used random sampling removed because of variabilityof variability of less of than less than 0.5 0.5on on SA4, SA4, CS5,CS5,methods. CS6, CS6, The CS8,cronbach’sdata using CS9 relating α initem. 0.92 reliability confidence Below analysis. to estimate for cronbach’s α in reliability analysis. Scree Plot shown that the restCS8, ofCS9 many item. variables Below Scree in Plotour shownstudy. that the rest of many variables in our study. Figure 2. Scree Plot Table 1. Questions and reliablity

Table 1. Questions and reliablity Standardized Cronbach’s α Item Cronbach’s α Standardized Cronbach’s α Item Cronbach’s α 0.925 0.927 25 0.925 0.927 25

Result Result Factor analysis also explored the relationship between the variables. In other words while the remaining 25 variablesFactor that isanalysis capable of alsowork valuesexplored of civil the servant relationship employees. between the variables. In other words while the remaining 25 variables that is capable of work values of civil servant employees. Table 2. Descriptive Statistics Table 2. Descriptive Statistics Std. Std. № Mean N № Mean N Deviation Deviation 1 SA2 3.76 0.973 644 14 PG1Std. 4.12 0.792 644 Std. № Mean N № 4 Mean N Deviation Deviation 1 SA2 3.76 0.973 644 14 PG1 4.12 0.792 644 4

3

214 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 2 SA3 3.9 0.959 644 15 PG2 3.87 0.865 644 Table 1. Questions3 and reliablitySA5 4.12 0.819RESULT 644 16 PG3 3.35 1.117 644 4 SA6 3.93 0.856Factor analysis 644 also explored17 PG4 the relationship 3.27 1.078 644 Standardized between the variables. In other words while the Cronbach’s α Item Cronbach’s5 α SA7 4.07 remaining 0.855 25 variables 644 that18 is capable PG5 of 3.79work 0.851 644 6 IH1 3.48 values 1.078 of civil servant 644 employees. 19 PG6 3.65 1.005 644 0.925 0.927 25 7 IH2 3.36 1.151 644 20 CS2 3.94 0.88 644 8 IH5 3.98 0.782 644 21 CS4 3.2 1.07 644 Table 2. Descriptive Statistics 9 IH6 4.1 0.736 644 22 CS7 3.25 1.085 644 Std. Std. № Mean N № Mean N 10 DeviationUO1 3.73 0.796 644 23Deviation AF1 3.34 1.284 644 1 SA2 3.76 11 0.973UO2 4.23644 14 0.73 PG1 6444.12 240.792 AF2 644 3.51 1.091 644 2 SA3 3.9 0.959 644 15 PG2 3.87 0.865 644 12 UO3 4.32 0.708 644 25AF3 3.3 1.13 644 3 SA5 4.12 0.819 644 16 PG3 3.35 1.117 644 4 SA6 3.93 13 0.856 UO4 3.85644 17 0.912PG4 6443.27 1.078 644 5 SA7 4.07 0.855 644 18 PG5 3.79 0.851 644 6 IH1 3.48 1.078 644 19 PG6 3.65 1.005 644 7 IH2 3.36Confirmatory1.151 644 factor 20analysisCS2 3.94 0.88 644 8 IH5 3.98 0.782 644 21 CS4 3.2 1.07 644 9 IH6 4.1 Our 0.736research644 work will22 doneCS7 by Confirmatory3.25 1.085 factory644 analysis to ensure that the 10 UO1 positive3.73 impact0.796 and the644 first hypothesis23 AF1 is 6 3.34variables.1.284 This644 factor analysis assumed to have 11 UO2 the following4.23 0.73 impact on644 25 variables.24 AF2 3.51 1.091 644 12 UO3 4.32 0.708 644 25 AF3 3.3 1.13 644 13 UO4 Figure3.85 4. Work0.912 values644 (25 parameters)

CONFIRMATORY FACTOR ANALYSIS Figure 4. Work values (25 parameters) Our research work will done by Confirmatory factory analysis to ensure that the positive impact and the first hypothesis is 6 variables. This factor analysis assumed to have the following impact on 25 variables.

Table 1. Hypotheses

We will done by Confirmatory factory to verify the tests

5

SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 215

Table 3. Hypotheses

Factor Factor 12345 12345 1 UO3 0.877 14 PG3 0.449 0.429 2 UO2 0.789 15 CS2 0.339 0.394 3 IH6 0.669 16 AF1 0.863 4 IH5 0.61 17 AF2 0.761 5 UO1 0.593 18 AF3 0.68 6 PG1 0.502 0.395 19 SA3 0.808 7 SA5 0.419 0.408 20 SA2 0.662 8 UO4 0.337 21 SA7 0.513 9 IH2 0.88 22 SA6 0.336 0.376 10 IH1 0.757 23 PG6 0.582 11 PG4 0.633 0.459 24 PG5 0.545 12 CS7 0.615 25 PG2 0.407 13 CS4 0.536

We will done by Confirmatory factory to verify the tests Table 2. Reliability analysis the work values of civil servants Table 4. Reliability analysis the work values of civil servants Variables Qt Qt Cronbach’sCronbach’s α α Self-actualization -SA 5 0,832 Self-actualization -SA 5 0,832 Interpersonal harmony -IH 4 0,750 Interpersonal harmony -IH 4 0,750 Utilitarian orientation -UO 4 0,755 PersonalUtilitarian growth -PG orientation -UO 4 6 0,7550,820 ComfortPersonal -CS growth -PG 6 3 0,8200,70 Stability,Comfort autonomy, -CS and flexibility -AF 3 3 0,700,838 Stability, autonomy, and flexibility -AF 3 0,838 Secondary school-9, garden-3, hospital-3, university-3, social insurance and taxes-6, administration-3, total 27 organizations, questionnaires 649. Secondary school-9, garden-3, hospital-3, university-3, social insurance and taxes-6, Tableadministration-3, 5. Descriptive statistics total 27 the organizations, work values of civilquestionnaires servants 649. Variables N Minimum Maximum Mean Std. Self-actualizationTable 3. Descriptive -SA statistics the work values649 of civil servants1 5 3.96 .890 Interpersonal harmony -IH 649 1 5 3.73 0.940 Utilitarian orientation -UOVariables 649N Minimum1 Maximum5 Mean4.05 Std..790 PersonalSelf-actualization growth -PG -SA 649649 11 55 3.963.60 .890.950 ComfortInterpersonal -CS harmony -IH 649649 11 55 3.733.46 0.9401.010 Stability,Utilitarian autonomy, orientation and flexibility -UO -AF 649649 11 55 4.053.38 .7901.130 Personal growth -PG 649 1 5 3.60 .950 Table 6. ANOVA analysis Comfort -CS 649 1 5 3.46 1.010 Sum of Mean Group df F Sig. Stability, autonomy, and flexibility -AF 649Squares 1 Square 5 3.38 1.130 Between Groups 13.651 4 3.413 3.682 .006 1. Self-actualization Within Groups 596.852 644 .927 Table 4. ANOVA analysis Total 610.502 648 Between Groups Sum4.719 of 4 1.180Mean 1.022 .395 Group df F Sig. 2. Interpersonal harmony Within Groups Squares743.250 644 Square1.154 Between Total 747.96913.651648 4 3.413 3.682 .006 Groups Between Groups .635 4 .459 .550 .910 Within 1. Self-actualization 596.852 644 .927 3. Utilitarian orientation WithinGroups Groups 409.636 644 .636 Total Total 610.502410.271 648 648 6

216 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Between Groups 4.013 4 1.003 1.610 .170 4. Personal growth Within Groups 401.371 644 .623 Total 405.384 648 Between Groups 6.477 4 1.619 2.105 .079 5. Comfort Within Groups 495.298 644 .769 Total 501.775 648 Between Groups 10.798 4 2.699 1.648 .161 6. Stability, autonomy, and Within Groups 1054.946 644 1.638 flexibility Total 1065.744 648

Developing as a result of the variance is 6. Comfort. This issue are ensured the significant that the estimated value of 598.73 and F working conditions of civil servants and statistic test of value. sustainable working of comfort. Group Through descriptive statistical analysis, issues from our study is one of the two the score of the 649 samples on Self-Actualized factors with the most recent assessment. factor is 4.74 the results show that there are no 7. Stability, autonomy, and flexibility. significant differences in the four variables of This issue has been weakest, for apparent age (p=0.362 > 0.05), gender (p=0.124 > 0.05), information and all within the flexibility education боловсрол (p=1.565 > 0.05), work in civil servants. experience (p = 0.05>0.05). However, in the work experience variable, the levels of Self-Actualized REFERENCE factor showed differences in the different amounts 1. Anderson, L. V. (2004). Comfirmatory of work experience. Factor Analysis. 2. Anderson, N. F. (2004). Future CONCLUSION perspectives on employee selection. An 1. We are create six variables the work International Review, 400-600. value of civil servants self-actualization, 3. Frieze, O. M., Locke & Henne, 1., & interpersonal harmony, utilitarian Shapria & Griffith, 1. (January 2006). orientation, personal growth, comfort, Work Values and Their Effect on Work stability, autonomy, and flexibility Behavior and Work Outcomes in Female of research has made the following and Male Managers. Sex Roles, pp. conclusions: Volume 54, Issue 1, pp 83-93. 2. Self-actualization. The relatively high 4. Jianqiao, H. &. (2011). The Structure satisfaction with the current civil servants and Measurement of the Work Values of of job self-actualization. Thus our public Chinese Civil Servants. SAGE journal. are showing a high interest in the civil 5. Super. (1970). Work values inventory. servants. . Houghton-Mifflin. 3. Interpersonal harmony. There to have 6. Batsaihan.B . (2013 ‘Fundamental an interest in working for unity and psychlogical’. Ulaanbaatar: NUM printing cooperation between political servants. service 4. Utilitarian orientation. Almost civil 7. Batkhurel.G (2011) “Trends theory, servants pride his work and self-job. But concept development of thinking through comparative psychology for civil management” Ulaanbaatar servants up to age 24, and 53 between 64 8. Narantuya.D (2015) “Qualitative age. Methodology “ UB, Admon Printing 5. Personal growth. The human development can make efforts to improve the skills and important than the age of the employee. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 217

REGARDING THE COMPOSITION OF FINANCIAL SOURCE OF INVESTMENT PROJECT

Bat-Od.D1 Postgraduate, Uranchimeg.P Ph.D 1. [email protected] 2. [email protected]

Brief Purpose of this research paper is to find the most suitable financial source option (Regular Stock, Preferred Stock, Corporate Bond) for the chosen company’s investment project by comparing the cost of capital of the recommended options. Result indicated that cost of regular stock was 0.1551 (15%), Cost of preferred stock was 0.1184 (11%), Cost of corporate bond was 0.2999 (30%) and the internal rate of return of the company’s project was 19%. Using the Weighted Average Cost of Capital, we have raised two potential mixture of investment tools: 15% (only regular stock) and 17% (34% of regular stock, 33% of preferred stock, 33% of corporate bond). In both options, cost of capital does not exceed the internal rate of return (19%). Which means both options are available to be implemented. But second option of 17% has been chosen as a most suitable option. Because attracting investment using only regular stock a.k.a IPO will affect the decision making strength of the company while the preferable stock cannot influence the decision making and corporate bond will be expired after maturity date. Key words: Cost of capital, Project, Investment tool, Stock

RESERCH: amount will be 21.4 billion MNT and maximum Chosen subject, “Moncement Building number of shares will be 30 million shares.1 Materials” LLC has made a decree on their Board The cost of capital for each investment source of Director’s meeting that they will be publicizing and has been calculated as follows: 15% of their own share to attract investment. Following that decree, MBM LLC has contacted to 1. Cost of Regular Stock Mira Asset SC and Golomt Capital SC and chosen Cost of capital using the CAPM model and Golomt Capital SC to be their main broker for their Gordon’s DDM model: shares. Decree has stated that attracting investment

Table 1. CAPM model calculation Ks = Rf - β*(Km-Rf) Market return /Km/ Required rate of return /Ks/ Risk-free rate /Rf/ Beta coefficient /β/ 0.15512360 0,15795 0,032338974 -0,104001562

Table 2. Gordon’s DDM model calculation Dividend amount /D/ Stock price /P/ Growth rate /g/ Required rate of return 24.9 468,602 -0.056384 0.15511101 We have used the average of two calculated cost of regular stock to be realistic as possible.

1Minutes of Meeting of Board of Directors 218 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

2.Cost of Preferred stock

Table 3. Cost of Preferred stock 2016 24.9 MNT (per unit) 2017 29.7 MNT (per unit) Kp 2016 0.126628627 Kp 2017 0.118457421

According to the calculation, cost of preferred stock was 0.1266 while in 2017 it was 0.1184 (11,84%). We will be using the 11,84% as a cost of preferable stock for further calculation.

3. Cost of Corporate Bond and calculations

Table 4. Cost of Corporate bond (before tax) Fee Annual rate Initial price Net income Maturity date Cost before tax 4% 18% 1,000,000 860000 2 0.333225806

If we consider the tax will be 10% and calculate the cost after tax:

Cost of attracting 21 billion of MNT with 2 years’ maturity bond will be 0.299 (30%). Most suitable 2 options using the costs of the investment tools are shown in the table below:

Table 5. WACC of 2 options Options Weight Cost Total RStock (100%) 0.155178 0.15517783 1 PStock (0%) 0.118457 0 Bond (0%) 0.299903 0 WACC 0.15517783 RStock (34%) 0.155178 0.052760462 2 PStock (33%) 0.118457 0.035537226 Bond (33%) 0.299903 0.089970968 WACC 0.178268656

4. NET PRESENT VALUE (NPV) AND PROJECT INTERNAL RATE OF RETURN CALCULATION Table 6. Net Present Value Calculation of Moncement Project Table 7. “Moncement” project IRR Deducting with only regular stock cost Initial investment Year (A) Incoming cash flows (B) PVIF= 1/(1+k)n PV (1)*(2) (Io) Initial (21,000,000,000) 1 8,990,000,000 0.844553457 7,592,535,575.58 13,808,464,424 2 10,445,000,000 0.713270541 7,450,110,802.77 6,358,353,622 3 10,911,000,000 0.602395101 6,572,732,948.27 (214,379,327) When the deducting rate is 19.01%, initial investment of the project will be equal to 0 at the end of the project. Which means 19.01% is our Internal Rate of Return. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 219

IRR of Project 19.0121879581%

Deducting with second option Year (A) Incoming cash flows (B) PVIF= 1/(1+k)n PV (1)*(2) Initial investment (Io) Initial (21,000,000,000) 1 8,990,000,000 0.865667583 7,782,351,569 13,618,648,430 2 10,445,000,000 0.749380364 7,827,277,901 5,791,370,529 3 10,911,000,000 0.648714288 7,078,121,599 (175,512,149)

Either of the option is below the IRR of the project, which means both of them are possible to be implemented.

CONCLUSION are most suitable. Regular stock can affect • If Moncement LLC use the Regular Stock the decision making if the number of as an investment tool for attracting 21 shares are centralized in one party while billion MNT for their project with cost of Preferable stock doesn’t influence the capital with 15.51%, their project NPV decision making of the company at all will be ending with 214 million MNT and corporate bond will be expired after profit. Also the cost of capital is below the maturity date is exceeded. Thus this 19.01% which means project is possible to mixture of three investment tool (34% be implemented with this mixture. of regular stock, 33% of preferred stock, • If we use WACC of each three investment 33% of corporate bond) is the low-risk tool (34% of regular stock, 33% of investment attracting option. preferred stock, 33% of corporate bond) with the cost of capital of 17.82%, their REFERENCES: project NPV will be ending with 175 1. Sainjargal.B, Munkh-Ochir.L “Investment million MNT profit. Also the cost of Project Analysis” 2004 capital is below 19.01% which means 2. Oyunchimeg. B “Methods to increase the project is possible to be implemented with profit of the project” 2008 this mixture. 3. Tserennadmid.H “Theoretical and • From the researcher’s perspective, Methodical issues of Investment attracting the investment with mixture Project profit analysis” 2013 (17.82%) of each three investment tools 220 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

RECORDS OF FARMLAND HISTORY NOTE

Usukhbayar.B1 (MSc), Zolzaya.G2 (Ph.D) 1 School of Engineering and technology, MULS, Mongolia 2 School of Economics and business, MULS, Mongolia

Abstract The crop area information is characterized by the degree of soil fertility, which contains a variety of complex properties, but these are not only used for specific reasons, but only parts are used. From here, the history of crop fields will be integrated into information agri-ties, which will enable crop production and intensification of risk reduction to increase crop yields and improve land use. By maintaining the history of the crop area, it is possible to plan ahead with the agrotechnical issues required for soil treatment and cultivation. Improving the soil fertility and moisture content of various soils, and ensuring that the conditions for obtaining high yields are properly maintained by the site. The principle of soil quality assertion is to compare the characteristics of the main characteristics of soil fertility and to state the quality of the soil’s quality and to compare the quality of one soil to another. In addition to the quality of soil, crop yields affect many factors, including climate, landscape, technology and ecology. In determining the hidden fertility, soil quality and crop yields are not considered, so the soil fertility of the soil is higher in the highest yields (Tobuu.L, 2005)

Key words: Sustainable agricultural development and land use management

INTRODUCTIONS basis. Soil fertility is over 60 years old, so it is very Since the beginning of the rapidly growing crop likely that our soil will become unsafe in the future. of our country, it has been extensive since the late Mongolia started to acquire the land at 1960-1963, 1950s and the establishment of a multidisciplinary while the humidity of the soil in the cultivated area farming and cultivation of crops and feeds is a was 2.5-4.0% or more. According to last year’s turning point in our country’s agricultural history. survey, humus content of humus in humus and Over the past 60 years, the sector has been growing, humus decreased to 1.0-2.4% and was below 50% growing, growing and strengthening, providing (Badarchin.A, 2017) food and feed for the country, and moving into a What is left behind in our crop production market economy for about 20 years, and it has been is farming. If there is no history of farming in the downgraded and revived. During this time, many future, it is likely that some years of cultivation will atmospheric campaigns have been announced not be left behind (Amarsanaa.B, Munkhjargal.O, and the technology has been developed for the 2017). development of new technologies and develops in The history of the field is based on the design of the modern times. Researchers and scientists have the field and other reasons (soil fertility, biological been working hard on introducing research findings features of crops, fertilizers, herbicides, agricultural into the production process, and the technology machinery, mechanics, level of staffing), and crop to protect the soil and plant fertilizers and plant yields for the coming year and its agrotechnical protection has been stabilized by soil cultivation, indicators. This is the basic document of Agronomy. cultivation, cultivation.

STUDY METHODS AND MATERIALS As a global concern that global climate change and global warming and desertification are taking place, the protection of soil fertility in the fields is one of the issues and a focus on the scientific As a global concern that global What is left behind in our crop climate change and global warming and production is farming. If there is no history desertification are taking place, the of farming in the future, it is likely that protection of soil fertility in the fields is some years of cultivation will not be left one of the issues and a focus on the behind (Amarsanaa.B, Munkhjargal.O, scientific basis. Soil fertility is over 60 2017). years old, so it is very likely that our soil The history of the field is based on will become unsafe in the future. Mongolia the design of the field and other reasons started to acquire the land at 1960-1963, (soil fertility, biological features of crops, while the humidity of the soil in the fertilizers, herbicides, agricultural cultivated area was 2.5-4.0% or more. machinery, mechanics, level of staffing), According to last year's survey, humus and crop yields for the coming year and its content of humus in humus and humus agrotechnical indicators. This is the basic decreased to 1.0-2.4% and was below 50% document of Agronomy. (Badarchin.A, 2017) SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 221

•Historical period of Atar land •The mechanization of farming was introduced in 100% 1959-1970 •Started preparing national professional cadres years •The main document was to follow the rules for the production of agricultural production

•Technological innovation was done •Higher investment •Reliable facilities 1970-1980 •The information and resources of the crop area have been created and strengthened years •Harvest volume increased 3 times

•Intensive development stage •Improved soil protection measures led to site surveys 1980-1990 •Scientific and scientific organizations work closely with the production of science and years technology

•Moved to a market economy •The farm fund was broken down and collapsed •The crop area has been decreasing year-on-year Since 1990 •In 2008 Crop III declared campaign stand set the beginning of fall and recovery •Area history records missing

PicturePicture 1.1. OverviewOverview of of crop crop development development

According to developmental was controlled and precisely in the past. It According to developmental developments, developments, the history of crop farms had a code and a code. the history of crop farms was controlled and precisely in the past. It had a code and a code. Table 1. The number of farming companies Number agrarian Number of agricultural Table 1. The №number of Year farming of Establishment companies farming enterprises Number agrarian Number of agricultural № Year of Establishment 1 Before 1970 farming47 enterprises 1 Before 1970 47 2 1970-1980 years 18 3 1980-1990 years 3 4 Since 1990 1190 TOTAL 68 1190

From the above table, the transition from a In the Law on Agriculture, adopted in 2016, market economy to a market society has resulted the crop producer is responsible for protecting in the collapse of collective farms and loss of and improving the productivity of farmland and production integrity, which resulted in the loss of maintaining a professional agrarian and field large quantities of agricultural crops, which did not history, which is a priority issue in the field of lead to the lack of history of the land. It is important to scientific production, deepen the institutional mechanisms for subsistence farming and farming firms by the state’s loan and subsidies policy and some favorable start-ups and to improve the legal environment. 222 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

CONCLUSIONS economic value of the land will be provided by The lack of sustainable crop production in scientifically and efficiently farming. Mongolia is caused by many factors, such as non- technologically responsible management, crop REFERENCES production technology leaders, and non-agronomic • Altansukh.N. (2008). Agricultural technological failures. technology. Properly keeping track of the field’s footprint • Amarsanaa.B, Munkhjargal.O. (2017). every year can provide efficient use of farmland, Record of farmland history. determining the economic benefits of agro-technical • Ariunbold.A. (2013). The first campaign and other measures, and providing comprehensive at Atar. measures to improve and store soil fertility. • Badarchin.A. (2017). Agronomic The history of the field is an important Thinking. document for the purchase and sale of the land • Tobuu.L. (2005). Agricultural technology. for citizens and companies. Therefore, the proper SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 223

ANALYZE USING DUMMY VARIABLES IN THE SOIL (Examples of crop cultivation centers and irrigation)

Zolzaya.G1 (Ph.D), Usukhbayar.B2 (MSc)

1 School of Economics and Business, MULS, Mongolia 2 School of Engineering and technology, MULS, Mongolia

Abstract The rotation of the crop is important in selecting the right structure of the irrigation crop. If the cultivation system is applied scientifically enough, it is possible to observe high-yielding elements of intensive technology such as soil treatment, fertilization systems, seeds, quality of varieties, irrigation norms, combustion of pests and weeds and mechanization of production. The irrigation crop area is divided into different types (crops, fodder plants, vegetable and mixed crops) depending on the type of plant that is mainly cultivated in our country. Using dummy variables in statistical analysis, any qualitative indicator is chosen by the factor characteristic. Specific gender differences, seasonal effects, occupations, climatic conditions, non-structural non-conformance conditions, and dependency on particular regions. Symbols are digitized so as to digitize them.

Key words: Switch to cultivation, factor analysis

INTRODUCTIONS Form of Equation: Nutrition is an important part of maintaining and improving soil fertility, thus increasing the yield of crops, protecting weeds, diseases and Form of Equation: � � � ����������������������� pests. In addition, it is not possible to cultivate one � = � � � ������������������� � = � � �� � crop for one crop in a single area because of the ��� � ��� �� � � ����������������������� abundance of moisture in the irrigated crop, but �� = � also in the cultivation of high yields and intensified Form of Equation:� � ������������������� y = α + bx + cd + ed + ε Study methods and materials 1 2 The company analyzed the soil and crops and soil fertility [4]. irradiated soil in the irrigated area in 2016. The conditional variable is called the TheSTUDY “Gatsuurt” METHODS plant, located AND inMATERIALS the central There are eight varieties of wheat, “dummy variable” [1]. The dummy variable is only croppingThe “Gatsuurt” zone, has plant,been subjectedlocated in to thea central potatoes, rapeseed, oats, barley, perennials, represented by numbers 0 and 1 [2]. This variable croppingdependent zone, analysis has been using subjected the dummy to a dependent carrots and onions. is expressed in the regression equation in the analysisvariables using of the the cultivation dummy of variablescrops of the The previous year's sowing and soil following methods. These include: cultivation(wheat, potato, of crops and (wheat, so on) potato,as a result and of so on) as 2577 hectares of irrigation 141 areas. characteristics are represented by the 1. Define the type of each species separately a result of 2577 hectares of irrigation 141 areas. (Appendix1, Appendix 2) correlation matrix of the correlation 2. For the purpose of preventing a single loss (Appendix1, Appendix 2) analysis. of data, it is defined as a dummy variable into the The company analyzed the soil and irradiated Table 1. Correlation matrix general equation. soil in the irrigated area in 2016. There are In the first case, depending on the process of eight varieties y1 of y2 wheat, y3 potatoes,y4 rapeseed,y5 y6 y7 y8 y9 y10 y11 y12 soaking the soil, crop yields and direct crop areas oats, barley,d1 0.01 perennials, 0.17 carrots0.02 -0.11 and onions.0.20 0.05 0.06 0.18 0.23 0.03 0.14 -0.13 can be estimated. In this case, the use of artificial The d2 previous0.08 -0.16 year’s -0.09 sowing -0.01 -0.05 and soil 0.02 -0.10 -0.12 -0.14 -0.05 0.05 -0.25 variables is more likely to be affected by the yield characteristicsd3 0.22 are represented0.04 0.23 by 0.09 the correlation-0.14 -0.10 -0.13 -0.33 -0.37 0.10 -0.29 -0.01 of fertilizers. (d = 1) -edge area, (d = 0) -footed area matrix d4of the-0.07 correlation 0.11 -0.08 analysis. -0.09 -0.13 -0.07 -0.18 -0.07 -0.06 0.10 0.25 0.11 d5 -0.18 -0.20 -0.13 0.30 0.45 0.38 0.26 0.10 0.11 -0.13 -0.04 0.12 d6 -0.20 0.04 0.04 -0.04 -0.23 -0.21 -0.03 0.19 0.21 -0.09 -0.05 0.24 d7 0.03 -0.01 -0.17 -0.10 0.00 -0.04 0.15 0.04 0.03 -0.04 0.07 0.06 d8 -0.04 -0.33 -0.08 -0.03 0.00 0.01 0.11 0.10 0.05 -0.03 -0.09 -0.06

Correct selection of previous year's crop 0.05), soil reaction in soil (r = -0.16) and yields have positive and negative impacts potassium (r = -0.25). on soil fertility, which can be seen from - In the case of the rapes, there is a the correlation matrix. In other words, the negative impact on the A-layer thickness (r previous sowing is: = 0.22), salt in the soil (r = 0.23), soil - Negative impacts on the soil are nitrogen humus (r = -0.33) and nitrogen (r = -0.37). (r = 0.23), Co2 (r = 0.20), positive The graph shows the humus, nitrogen, conductivity (r = -0.11) and potassium size phosphorus, and potassium as the main (r = -0.13). parameters of the soil that increase the - Potential adverse impacts on soil at the yield of crops. soil (r = 0.08), phosphorus in soil (r = Figure 1. Soil humus and dummy variables Figure 2. Nitrogen and dummy variables 224 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

Table 1. Correlation matrix y1 y2 y3 y4 y5 y6 y7 y8 y9 y10 y11 y12 d1 0.01 0.17 0.02 -0.11 0.20 0.05 0.06 0.18 0.23 0.03 0.14 -0.13 d2 0.08 -0.16 -0.09 -0.01 -0.05 0.02 -0.10 -0.12 -0.14 -0.05 0.05 -0.25 d3 0.22 0.04 0.23 0.09 -0.14 -0.10 -0.13 -0.33 -0.37 0.10 -0.29 -0.01 d4 -0.07 0.11 -0.08 -0.09 -0.13 -0.07 -0.18 -0.07 -0.06 0.10 0.25 0.11 d5 -0.18 -0.20 -0.13 0.30 0.45 0.38 0.26 0.10 0.11 -0.13 -0.04 0.12 d6 -0.20 0.04 0.04 -0.04 -0.23 -0.21 -0.03 0.19 0.21 -0.09 -0.05 0.24 d7 0.03 -0.01 -0.17 -0.10 0.00 -0.04 0.15 0.04 0.03 -0.04 0.07 0.06 d8 -0.04 -0.33 -0.08 -0.03 0.00 0.01 0.11 0.10Soil0.05 humus-0.03 -0.09 -0.06 Nitrogen Correct selection of previous year’s crop 0.300- In the case of the rapes, there is a negative yields have positive and negative impacts on soil impact0.200 on the A-layer thickness (r = 0.22), salt 0.200 fertility, which can be seen from the correlation in the0.100 soil (r = 0.23), soil humus (r = -0.33) and matrix. In other words, the previous sowing is: nitrogen0.000 (r = -0.37). 0.000 - Negative impacts on the soil are nitrogen (r -0.100The graphd1 d2 shows d3 d4 the d5 d6humus, d7 d8nitrogen, d1 d2 d3 d4 d5 d6 d7 d8 = 0.23), Co2 (r = 0.20), positive conductivity (r = phosphorus,-0.200 and potassium as the main parameters -0.200 -0.11) and potassium size (r = -0.13). of the-0.300 soil that increase the yield of crops. -0.400 -0.400 - Potential adverse impacts on soil at the soil (r The following table shows the socioeconomic = 0.08), phosphorus in soil (r = 0.05), soil reaction parameters of the previous year’s sowing and soil Figure 3. Phosphorus and dummy variables in soil (r = -0.16) and potassium (r = -0.25). parameters.Figure 4. Potassium and dummy variables

Figure 1. SoilSoil humus humus and dummy variables Figure 3. PhosphorusNitrogen and dummy variables 0.300 0.200 Soil humus 0.200PhosphorusNitrogen in the soil Potassium in the soil 0.100 0.300 0.300 0.3000.000 0.000 0.200 0.200 -0.1000.200 d1 d2 d3 d4 d5 d6 d7 d8 0.200 d1 d2 d3 d4 d5 d6 d7 d8 0.100 0.100 -0.2000.100 -0.200 0.000 0.0000.000 0.000 -0.300 d1 d2 d3 d4 d5 d6 d7 d8 d1 d2 d3 d4 d5 d6 d7 d8 d1d1 d2 d2 d3 d3 d4 d4 d5 d5 d6 d6 d7 d7 d8 d8 -0.100 -0.100-0.400 -0.400-0.100 -0.200 -0.200 -0.200-0.200 -0.300 -0.300 Figure 3. Phosphorus and dummy variables -0.300 -0.400Figure 4. Potassium and dummy variables -0.400

TheFigure following 4. Potassium table shows and dummythe socioeconomic variables parameters of the previous year's sowing and soil FigureFigure 2.3. NitrogenPhosphorus and and dummy dummy variables variables parameters. Figure 4. Potassium and dummy variables Phosphorus in the soil Potassium in the soil Table 2. Regression of many factors Soil humus Nitrogen 0.300 0.300 Correlation Soil Fischer 0.300 Equation with an dummy variable coefficient of many 0.200 indicator0.200Potassium in the soil 0.200 0.200Phosphorus in the soil factors 0.100 0.100 0.100 0.300 0.300 ���� >����� 0.000 0.000 0.2000.000 Humus0.200 d1 d2 d3 d4 d5 d6 d7 d8 -0.100 d1 d2 d3 d4 d5 d6 d7 d8 d1d1 d2 d2 d3 d3 d4 d4 d5 d5 d6 d6 d7 d7 d8 d8 -0.100, % �� � 3.13 � 0.�5�1 � 0.�5�� -0.1000.100 0.100 � 0.7��3 � 0.53�4 -0.200 -0.200 -0.200 � � 0.4� 4.04 > 0.000 -0.2000.000 0.000 � 0.1��5 � 0.03�� -0.300 d1 d2 d3 d4 d5 d6 d7 d8 d1 d2 d3 d4 d5 d6 d7 d8 -0.100-0.300 � 0.�7�7 -0.400 -0.100-0.400-0.300 N, % -0.200 �� � 0.�� � 0.001�1 � 0.03�� -0.200 � 0.03�3 � 0.0��4 The following table shows the socioeconomic parameters of the previous year's sowing and soil � � 0.4� 5.10 > 0.000 Figure 3. Phosphorus and dummy variables -0.300 � 0.00��5 � 0.01�� Figure 4. Potassium and dummy variables parameters.-0.300 � 0.00��7 P2O5 The following table shows the socioeconomic parameters of the Tableprevious�11 �2. 1.�Regression year's � 0.7��1 sowing of many � and 0.7��� factors soil parameters. � 0.0��3 � 1.4��4 Correlation � � 0.3� 3.45 > 0.001 Soil Potassium in the soil � 0.44�5Fischer � 0.45�� Phosphorus in the soil Equation with an dummy variable coefficientTable of 2. manyRegression � 0.�3�7of many factors indicator 0.300 0.300 K2O factors�1� � 11.7 � 1.44�1 � 3.�7�� Correlation 0.200Soil � �.5��3Fischer��� � ���� 5.�4�4 0.200 Equation with an dummy variable coefficient of many � >� � � 0.3� 3.37 > 0.001 indicatorHumus � 5.�3�5 � 7.�5�� 0.100 0.100 factors , % �� � 3.13 � 0.�5�1 � 0.�5�� � 4.5�7 0.000 0.000 � 0.7��3 � 0.53�4 ���� >����� d1 d2 d3 d4 d5 d6 d7 d8 � � 0.4� 4.04 > 0.000 d1 d2 d3 d4 d5 d6 d7 d8 Humus-0.100 � 0.1��5 � 0.03�� -0.100 �� � 3.13 � 0.�5�1 � 0.�5�� -0.200, % � 0.�7�7 -0.200 � 0.7��3 � 0.53�4 N, % �� � 0.�� � 0.001�1 � 0.03�� � � 0.4� 4.04 > 0.000 -0.300 � 0.1��5 � 0.03�� -0.300 � 0.03�3 � 0.0��4 � 0.�7�7 � � 0.4� 5.10 > 0.000 � 0.00��5 � 0.01�� N, % �� � 0.�� � 0.001�1 � 0.03�� The following table shows the socioeconomic parameters of the previous year's �sowing 0.00��7 and soil � 0.03�3 � 0.0��4 parameters. P2O5 �11 � 1.� � 0.7��1 � 0.7��� � � 0.4� 5.10 > 0.000 � 0.00��5 � 0.01�� � 0.0��3 � 1.4��4 Table 2. Regression� 0.00��7of many factors � � 0.3� 3.45 > 0.001 P2O5 � 0.44�5 � 0.45�� Correlation�11 � 1.� � 0.7��1 � 0.7��� Soil � 0.�3�7Fischer Equation with an dummy variable K2Ocoefficient of many � 0.0��3 � 1.4��4 indicator �1� � 11.7 � 1.44�1 � 3.�7�� � � 0.3� 3.45 > 0.001 factors � 0.44�5 � 0.45�� � �.5��3 � 5.�4�4 � 0.�3�7��� ���� � � 0.3� 3.37 > 0.001 K2O �� 5.�3�5>� � 7.�5�� Humus �1� � 11.7 � 1.44�1 � 3.�7�� �� �.5��3 4.5�7 � 5.�4�4 , % �� � 3.13 � 0.�5�1 � 0.�5�� � � 0.3� 3.37 > 0.001 � 0.7��3 � 0.53�4 � 5.�3�5 � 7.�5�� � � 0.4� 4.04 > 0.000 � 0.1��5 � 0.03�� � 4.5�7 � 0.�7�7 N, % �� � 0.�� � 0.001�1 � 0.03�� � 0.03�3 � 0.0��4 � � 0.4� 5.10 > 0.000 � 0.00��5 � 0.01�� � 0.00��7 P2O5 �11 � 1.� � 0.7��1 � 0.7��� � 0.0��3 � 1.4��4 � � 0.3� 3.45 > 0.001 � 0.44�5 � 0.45�� � 0.�3�7 K2O �1� � 11.7 � 1.44�1 � 3.�7�� � �.5��3 � 5.�4�4 � � 0.3� 3.37 > 0.001 � 5.�3�5 � 7.�5�� � 4.5�7 SoilSoil humus humus NitrogenNitrogen 0.3000.300 0.300 0.2000.200 0.2000.200 0.200 0.200 0.1000.100 0.100 0.0000.000 0.0000.000 0.000 0.000 -0.100-0.100d1d1 d2 d2 d3 d3 d4 d4 d5 d5 d6 d6 d7 d7 d8 d8 d1d1 d2 d2 d3 d3 d4 d4 d5 d5 d6 d6 d7 d7 d8 d8 -0.100 d1 d2 d3 d4 d5 d6 d7 d8 d1 d2 d3 d4 d5 d6 d7 d8 -0.200-0.200 -0.200-0.200 -0.200 -0.200 -0.300-0.300 -0.300 -0.400-0.400 -0.400-0.400 -0.400 -0.400

FigureFigure 3. Phosphorus 3. Phosphorus and and dummy dummy variables variables Figure 3. Phosphorus and dummy variables FigureFigure 4. Potassium 4. Potassium and and dummy dummy variables variables Figure 4. Potassium and dummy variables

PhosphorusPhosphorus in in the the soil soil PotassiumPotassium in in the the soil soil 0.3000.300 0.3000.300 0.300 0.300 0.2000.200 0.2000.200 0.200 0.200 0.1000.100 0.1000.100 0.100 0.100 0.0000.000 0.0000.000 0.000 0.000 d1d1 d2 d2 d3 d3 d4 d4 d5 d5 d6 d6 d7 d7 d8 d8 d1d1 d2 d2 d3 d3 d4 d4 d5 d5 d6 d6 d7 d7 d8 d8 -0.100-0.100d1 d2 d3 d4 d5 d6 d7 d8 -0.100-0.100d1 d2 d3 d4 d5 d6 d7 d8 -0.100 -0.100 -0.200-0.200 -0.200-0.200 -0.200 -0.200 -0.300-0.300 -0.300-0.300 -0.300 -0.300

TheThe following following table table shows shows the the socioeconomic socioeconomic parame parametersters of ofthe the previous previous year's year's sowing sowing and and soil soil parameters.parameters. parameters. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 225 TableTable 2. Regression 2. Regression of manyof many factors factors Table 2. Regression of many factors Table 2. Regression of many factors CorrelationCorrelation SoilSoil Soil Correlation coefficient of FischerFischer EquationEquation withwith with an an dummy andummy dummy variable variable variable coefficientcoefficient of ofmany many indicatorindicatorindicator many factors factorsfactors ��� ��� �������� ����� >�>����� HumusHumus � >� HumusHumus, % R= 0.42 4.04 > 0.0000 ���� � 3.13� 3.13 � 0.�5�1 � 0.�5�1 � 0.�5�� � 0.�5�� , %, % �� � 3.13 � 0.�5�1 � 0.�5�� � 0.7��3� 0.7��3 � 0.53�4 � 0.53�4 � �� 0.4�� 0.4� 4.044.04 > 0.000> 0.000 � 0.1��5� 0.1��5 � 0.03�� � 0.03�� � 0.�7�7� 0.�7�7 N, N,% N,% % R= 0.49 5.10 > 0.0000 N, % ���� � 0.��� 0.�� � 0.001�1 � 0.001�1 � 0.03�� � 0.03�� � 0.03�3� 0.03�3 � 0.0��4 � 0.0��4 � �� 0.4�� 0.4� 5.105.10 > 0.000> 0.000 � 0.00��5� 0.00��5 � 0.01�� � 0.01�� � 0.00��7� 0.00��7 P OP2OP52 O5 R= 0.39 3.45 > 0.004 2 P52O5 �11�11 � 1.�� 1.� � 0.7��1 � 0.7��1 � 0.7��� � 0.7��� � 0.0��3� 0.0��3 � 1.4��4 � 1.4��4 � �� 0.3�� 0.3� 3.453.45 > 0.001> 0.001 � 0.44�5� 0.44�5 � 0.45�� � 0.45�� � 0.�3�7� 0.�3�7 K OK O � 0.�3�7 K OK2O 2 �1��1� � 11.7� 11.7 � 1.44�1 � 1.44�1 � 3.�7�� � 3.�7�� R= 0.39 3.37 > 0.001 2 2 �1� � 11.7 � 1.44�1 � 3.�7�� � �.5��3� �.5��3 � 5.�4�4 � 5.�4�4 � �� 0.3�� 0.3� 3.373.37 > 0.001> 0.001 � 5.�3�5� 5.�3�5 � 7.�5�� � 7.�5�� etc. � 4.5�7� 4.5�7

The correlation coefficient of many factors 2. Selecting optimal crop rotation during ranges from 0.22 to 0.55, indicating the moderate irrigation can be a great opportunity to degree of soil fertility in calculating the incremental harvest. variables by the dummy variables. 3. The past does not affect all soil parameters. Fischer attributes the value of which means it It creates a different impact. is reasonable to estimate the artificial variables. An 4. Growth in irrigated farming in the central artificial variable can be explained in each equation. crop area - Wheat - Nitrogen and potatoes For example, mobile phosphorus equation is - Thickness, rapeseed - salt and oats - considered. phosphorus, barley - CO2, perennial It shows that in the previous year, wheat was - potassium, onions and carrots - Mg 0.78, potato was 0.79, rapeseed was 0.09, oatmeal increases soil . was 1.46, barley was 0.44, perennial was 0.46 and 5. A moderate degree of dependence on 0.93 was phosphorus. It is possible to explain each pastoral crops. equation. REFERENCES CONCLUSIONS 1. Nyambat.L “Economic Metrology”, first The qualitative indicators of the agricultural book, 2014 data are often the case. It can be done by statistical 2. Ch.Naranchimeg.Ch, Ganzorig.D analysis by entering dummy variables and “Business statistics and econometric explaining results. The following conclusions have basis”, 2013 been made to examine how soil parameters change 3. Nyambat.L, Enkhmaa.B, “Assessment of during the previous year’s irrigation crop. These Soil and Agricultural Land of Mongolia”, include: 2010 1. Two methods of calculating artificial 4. Munkhjargal.O, “Irrigated crop”, 2013 variables for agricultural data can be used. 226 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

APPENDIX Appendix 1. The irrigation of soil characteristics and area

Nutritional А gr elements Salt, CO2, Humus, NO3 Field thick, pH N, % mg/100 g Basics of % ds/m % % mg/100g mg-eco/100 cm Electric number conversation, conductivity, conductivity,

Ca Mg P2O5 K2O y1 y2 y3 y4 y5 y6 y7 y8 y9 y10 y11 y12 p1 18 7.0 0.03 0.100 - 22 5 3.84 0.28 0.93 1.8 10 p2 24 7.7 0.07 0.22 6.6 14 5 0.36 0.29 2.89 3.3 4 ...... p140 21 6.8 0.04 0.12 0 13 5 2.99 0.23 0.65 2.3 18 p141 20 7.7 0.03 0.11 0.7 29 4 2.27 0.17 0.63 0.6 12

Appendix 2. Each area of the previous year’s crops, dummy variable Previous year’s crops Field number Wheat Potato Rape Oats Barley Perennials Carrots Onions d1 d2 d3 d4 d5 d6 d7 d8 p1 1 0 0 0 0 0 0 0 p2 1 0 0 0 0 0 0 0 ...... p140 0 0 0 0 0 1 0 0 p141 0 0 1 0 0 0 0 0 SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 227

ANALYSIS OF THE FACTORS AFFECTING STOCK RETURN USING A DYMANIC PANEL DATA

Buyannemekh.P 1, Narangerel.G 2

1 Northwest A&F University, Doctorant [email protected] 2 Northwest A&F University, Doctorant [email protected]

Abstract: This research aimed to analyze the impacts of the factors affecting the stock return using dynamic panel data analysis. Comparing to the previous many literatures which used cross-sectional and time series analysis this research applied dynamic panel data estimators, Generalized method of moments (GMM) and system GMM. The analysis used the data of the light industry 14 firms that are listed in the first two tiers of Mongolian Stock Exchange from 2005 to 2016. In both model the Arellano Bond autocorrelation tests and Sargan test illustrated no evidence of model misspecification and indicated the instruments were valid. However, the statistical significances of the variables were poor except interest rate. And the system GMM showed better results than difference GMM. The lagged stock return, firm ratios such as leverage ratio, net profit margin, current ratio and price, earnings ratio had positive impact on stock return. On the other hand, the beta coefficient, exchange rate and interest rate had negative relationship with the stock return. The coefficients of the variables were consistent with the theoretical influence on stock returns. However, comparing to the previous literatures interest rate effect were contrast. Keywords: stock return, dynamic panel data, generalized method of moments, non-exogenous variables and firm individual factors on stock returns INTRODUCTION: simultaneously using dynamic panel data analysis. Despite the relatively short time existence This paper is organized in the following way. of Mongolian capital market, it has been shown Section 2 reviews the relative literatures. Section 3 rapid growth since 2006. The stock exchange provides the data and variable description as long as of Mongolia already has constructed the world with the specification of dynamic panel data model. standard infrastructure and the related legal Section 4 presents the empirical results. And at last environment is being improved continuously. the key elements of this research and further works Professional investment companies, mutual funds which have to be done reported in the Section 5. started to operate and the people’s knowledge about capital market and their attendance in transaction is MODEL SPECIFICATION AND DATA being increased. DESCRIPTION: In this desirable situation, the investment analysts, experts and policy makers are interested III.a Methodology in understanding the stock return behavior. They The general dynamic panel data model which want to explore how the changes in macroeconomic is used in the research done by Sebnem & Bengu environment or the changes in the certain company (2008): operation could affect the stock performance. For instance, how can the inflation affect the return, {1} {1} how much return is the new technology of company � � � 1 where yit is the� �� stock� �� return����� �� of � � firm�� �i� in�� year��� ��t, z��i are the time invariant firm specific can bring and so on. where yit is the stock return of firm i in year observable variables, rt are the firm invariant time specific observable variables, xit are the Although this issue has been studied broadly t, zi are the time invariant firm specific observable time and firm variant financial variables, vit are the unobservable factors that affect the firm i on internationally, there are so few studies have been variables, rt are the firm invariant time specific stock returns year t, error term. Error term has two components, done in our country case. In this research we aimed observable variables, xit are the time and firm variant to study the effects of both the macroeconomic financial variables, v are the unobservable factors it {2}

µi specific to firms that doesn’t� ��change��� �� over�� time and uit that changes both over time and for firms. Because of following challenges we can’t use fixed effect (FE) or random effect (RE) model. - The lagged dependent variable is necessarily correlated with the error terms, which arises endogeneity problem - The lagged dependent variable also gives rise to autocorrelation - The time in-variant firm specific fixed effects are contained in error term such as shown in {3}. There are several efficient estimators for dynamic panel data such as Anderson & Hsiao (AH) – Instrumental Variables approach, Arellano & Bond – GMM (generalized method of moments) model, Arellano & Bover – System GMM. These methods mainly focus on finding consistent estimators by the help of the inclusion of instruments that are correlated with the lagged dependent variable and that are not correlated with the error term. However, AH estimator is considered to be inefficient because of failing take all of the potential orthogonality conditions into account. The GMM models use first difference to eliminate the individual fixed effects. {3} � � � Then subtract������ from� {1} ������� and ��the first�� �� difference���� �� is ������ ��� �������

� � And to treat the endogeneity�� ��and� ���autocorrelation����� ���� GMM� �� ��uses�� � the �� deeper��� lags of the dependent variable as instrumental variables for the differenced lags of the dependent variable. In this study we used both the GMM and SGMM models. III.b Data & Sampling There are 218 companies listed in Mongolian Stock Exchange, which are divided in three tiers. Tier 1 and 2 consists of the firms whose stock is traded at least last two years and more than 15% of the total shares must be publicly traded, semi-annual trading value of the firm’s share must be higher than 5% of total trading value of the stock exchange. To do the analyze we need the firm information whose shares are traded active. So, among the first two tiers, 50 firms, we chose 14 firms which are operating in light industry and collected the relative data from 2005-2016. As done as in the study of Bengu & Vuran (2007), we considered the widely used variables which are investigated in the former literatures.

1 Factors affecting stock returns of firms quoted in ISE market, Bengu Vuran 2 {1} � � � 1 {1} �� ����� � � �� �� where yit is the� stock� �� return� �� of� � firm��� �i in�� year� 1 ��t, zi are the time invariant firm specific �� ����� � � �� �� where yitobservableis the� stock� variables, �� return�� r oft are � firm�� the firm�i in�� invariant year� ��t, z timei are specific the time observable invariant variables, firm specific xit are the observabletime variables, and firm r variantt are the financial firm invariant variables, time vit are specific the unobservable observable factors variables, that affectxit are the the firm i time and firmstock variantreturns financialyear t, error variables, term. Error vit areterm the has unobservable two components, factors that affect the firm i stock returns year t, error term. Error term has two components, {2} {2} µi specific to firms that doesn’t� ��change��� �� over�� time and uit that changes both over time and for firms. �� � �� µi specific to firms that doesn’t� change�� �� over time and uit that changes both over time and for firms. Because of following challenges we can’t use fixed effect (FE) or random effect (RE) model. Because of following- The challengeslagged dependent we can’t variable use fixed is necessari effect (FE)ly correlated or random with effect the (RE)error model.terms, which - The laggedarises dependent endogeneity variable problem is necessarily correlated with the error terms, which arises endogeneity- The lagged problem dependent variable also gives rise to autocorrelation - The lagged- The dependent time in-variant variable firm also specific gives rise fixed to eautocorrelationffects are contained in error term such as shown in {3}. - The time in-variant firm specific fixed effects are contained in error term such as shownThere in {1}are {3}. several efficient estimators for dynamic panel data such as Anderson & Hsiao (AH) � � � 1 – Instrumental Variables approach, Arellano & Bond – GMM (generalized method of �� ����� � � �� �� where yit is the� stock� �� return228 �� | of SCIENTIFIC � firm�� �i JOURNAL-AGRICULTURALin�� year� ��t, zi are theThere timeECONOMICS are moments) several invariant efficient - model,2018 firm Arellanoestimators specific & forBover dyna – micSystem panel GMM. data Thesesuch as methods Anderson mainly & Hsiao focus (AH)on finding – Instrumental Variables approach, Arellano & Bond – GMM (generalized method of observable variables, rt are the firm invariant time specific observableconsistent variables, estimators xit areby the the help of the inclusion of instruments that are correlated with the moments)lagged model, dependent Arellano & variable Bover and– System that are GMM. not correlatedThese methods with themainly error focus term. on However, finding AH time and firm variant financialthat affect variables, the firm viti arestock the returns unobservable year t, error factors term. that affectorthogonality the firm conditions i into account. Error term has two components, consistentestimator estimators is by considered theThe help GMM of to the be inclusion models inefficient of use becauseinstruments first of failingthatdifference are take correlated all to of with the potentialthe stock returns year t, error term. Error term has two components,lagged dependent variable and that are not correlated with the error term. However, AH orthogonalityeliminate conditions the into individual account. fixed effects. estimator is considered to be inefficient because of failing take all of the potential {2} The GMM models use first difference to eliminate the individual fixed effects. {2} orthogonality conditions into account. µ specific to firms that doesn’t change over {3} {3} µi specific to firms that doesn’ti �� change� over�� time and uit that changes both over time and for � �� �� The GMM models use first difference to� eliminate� the individual� fixed effects. time and u that changes both over time and for ����� ����� � ��� ����� � ����� firms. it Then subtract� from� {1} �� and ��the first� �� difference� �� is � �� �� firms. Then subtract from {1} and the first difference {3} � � � Because of following challengesBecause we can’t of followinguse fixed challengeseffect (FE) Thenwe or randomcan’t subtract use������ fromeffect � is{1} �� (RE)����� and ��themodel. first�� �� difference ���� �� is ������� ��� ��� ����� And to treat the endogeneity�� ��and� ���autocorrelation����� ���� GMM� �� ��uses�� � the �� deeper��� lags of the dependent - The lagged dependentfixed effectvariable (FE) is ornecessari random lyeffect correlated (RE) model.withvariable the error as instrumental terms, which variables for the differenced lags of the dependent variable. - The lagged dependent variable is necessarily � � arises endogeneity problem And to treatIn this the studyendogeneity we used�� �� andboth� ���autocorrelation the �����GMM�� and�� SGMMGMM� �� �� usesmodels.�� � the �� deeper��� lags of the dependent correlated with the error terms, which arises variable asIII.b instrumental Data & SamplingAnd variables to for the treat differenced the lags endogeneity of the dependent variable. and - The lagged dependentendogeneity variable problem also gives rise to autocorrelation In this studyThere we areused autocorrelation 218 both companies the GMM listed and GMM SGMM in Mongolian models.uses Stockthe deeper Exchange, lags which of are divided in three - The lagged dependent variable also givestiers. Tier 1 and 2 consists of the firms whose stock is traded at least last two years and more - The time in-variant firm specific fixed effects are containedIII.b Data & in Sampling errorthe term dependent such as variable as instrumental variables rise to autocorrelation than 15% of the total shares must be publicly traded, semi-annual trading value of the firm’s shown in {3}. for the differenced lags of the dependent - The time in-variant firm specificThere fixed areshare effects 218 mustcompanies be higher listed than in5% Mongolian of total trading Stock value Exchange, of the stock which exchange. are divided in three tiers. Tier 1 and 2 consists of the firms whose stock is traded at least last two years and more There are several efficientare estimators contained for in errordyna micterm panel such dataas shown such inas {3}.AndersonTo do the analyzevariable. & Hsiao we need (AH) the firm information whose shares are traded active. So, among the than 15%first of the two total tiers, shares 50 firms, must we be chose publicly 14 firms traded, which semi-annual are operating trading in light value industry of the and firm’s collected – Instrumental Variables approach,There are Arella severalno & efficient Bond – GMMestimatorsshare must (generalizedthe be relative higherfor than data method In5% from thisof 2005-2016. total study of trading we As value doneused of as the both in stock the the study exchange. GMM of Bengu and & Vuran (2007), we moments) model, Arellanodynamic & Bover panel – System data suchGMM. as TheseAnderson methodsTo do& the Hsiao mainlyconsidered analyze wefocusSGMM the need widely on the models.finding usedfirm variablesinformation which whose are investigatedshares are traded in the active.former literatures.So, among the consistent estimators by (AH)the help - Instrumental of the inclusion Variables of instruments approach,first twoArellanothat tiers, are 50 correlated firms, we chosewith 14the firms which are operating in light industry and collected the relative data from 2005-2016. As done as in the study of Bengu & Vuran (2007), we lagged dependent variable& Bond and that- GMM are (generalized not correlated method with ofconsidered the moments) error the term. widely However, used III.b variables Data AH which & Sampling are investigated in the former literatures. 1 Factors affecting stock returns of firms quoted in ISE market, Bengu Vuran estimator is considered model, to be Arellano inefficient & Bover because - System of failing GMM. take These all of theThere potential are 218 companies2 listed in Mongolian orthogonality conditions intomethods account. mainly focus on finding consistent Stock Exchange, which are divided in three tiers.

estimators by the help of the inclusion of1 Factorsinstruments affecting stock returnsTier of firms 1 quoted and in 2ISE consistsmarket, Bengu ofVuran the firms whose stock is The GMM models use firstthat difference are correlated to eliminate with thethe individual lagged dependentfixed effects. traded at least last two 2years and more than 15% of variable and that are not correlated with the error the {3} total shares must be publicly traded, semi-annual term. However,� � AH estimator� is considered to be trading value of the firm’s share must be higher than ����� ����� � ��� ����� � ����� Then subtract� from� {1} �� andinefficient ��the first� �� differencebecause� ��of failingis � take�� all�� of the potential 5% of total trading value of the stock exchange.

� � And to treat the endogeneity�� ��and� ���autocorrelation����� ���� GMM� �� ��uses�� � the �� deeper��� Diff lags GMM of the dependent Sys GMM variable as instrumental variables for theLag differenced R lags of the dependent0.0249 variable. 0.2204 (0.395) (0.096) In this study we used both the GMM andBeta SGMM models. -0.1038 -0.1358 III.b Data & Sampling (0.195) (0.145) Lev 0.1964 0.0526 There are 218 companies listed in Mongolian Stock Exchange, which (0.166) are divided in three (0.56) tiers. Tier 1 and 2 consists of the firms whosePm stock is traded at least last0.0698 two years and more -0.003 than 15% of the total shares must be publicly traded, semi-annual trading(0.482) value of the firm’s (0.971) share must be higher than 5% of total tradingCr value of the stock exchange.0.0355 0.2632 To do the analyze we need the firm information whose shares are traded active.(0.255) So, among the (0.172) first two tiers, 50 firms, we chose 14 firmsPe which are operating in light industry0.0404 and collected 0.0336 (0.242) (0.148) the relative data from 2005-2016. As done as in the study of Bengu & Vuran (2007), we Usd -0.1527 -0.1478 considered the widely used variables which are investigated in the former literatures. (0.407) (0.189) Int -0.407 -0.5135 (0.002) (0.000) Cons 0.018 1 Factors affecting stock returns of firms quoted in ISE market, Bengu Vuran 2 (0.793) AR(1) 0.003 AR(2) 0.33 Sargan test 0.801 Instruments used 45 SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 229

To do the analyze we need the firm information a short period of time, the returns will move back whose shares are traded active. So, among the first toward the average.1 two tiers, 50 firms, we chose 14 firms which are Market beta and the interest rate both have operating in light industry and collected the relative negative impact. According to stock valuation data from 2005-2016. As done as in the study of income approach future cash flows related to stock, Bengu & Vuran (2007), we considered the widely such as dividend is discounted by appropriate used variables which are investigated in the former interest rate. Since the current value of future literatures. dividends decreases as interest rates increase, we Empirical results: In table 3 the results of would expect a negative coefficient for the impact the two models are reported. We can compare the of the interest rate on stock returns. Furthermore, model effectiveness considering the model results, beta coefficient implies the sensitivity of market sargan test and autocorrelation test results. Also we risk. Higher the beta, higher the non-diversifiable have to consider that the system GMM uses more risk. Higher the risk, lower the market price and this instruments than that GMM uses. When the number means the negative relationship between beta and of instruments are many the Sargan test may be stock return. weak. The leverage ratio which indicates the usage The estimation was done by Stata xtabond2 of external capital (interest bearing long term debt) command and took the P/E ratio (Pe) and Beta had positive effect. Even the usage of leverage coefficient (Beta) as semi endogenous variables. increases risk, it also increases the return of the Because of the estimations of these variables are equity owners. The motivation of using leverage is related to stock price. Also we used lag limits to to obtain greater profit by keeping equity constant. 2 period, if not there will be too many instruments The cost of debt is smaller than stock and also the comparing to the observation number N. interest cost brings tax reduction. The current ratio As seen from the result, the system GMM has which indicates the liquidity of firm and the P/E better results than difference GMM. The SGMM ratio which indicates the market performance of the significance of the parameters are better than the firm both related positively with the stock return. GMM, however both of them doesn’t indicate Exchange rates impact the level of imports and enough significance except interest rate. exports, which in turn can have a major impact on In both model the Arellano Bond the future productivity and earnings of firms. These autocorrelation tests presented no evidence of factors can then influence the level of stock prices. model misspecification. Also the Sargan test which Higher the exchange rate affects worse to the stock examines that whether the instruments are valid or return. not, implied that the over-identifying restrictions The least significant variable was net profit are valid. And in all case the SGMM performed margin. It showed different result in two models. better. In system GMM, the coefficient is so small and the The previous stock return had positive impact statistical significance is too low. on stock return. We can explain the positive effect by the expectation of investors. High historical CONCLUSION: prices can express a sign of good performance of By now, a substantial amount of research the stock to investors. So this pleasant sign will has been devoted to investigations of stock increase the demand of the shares and the stock returns using both cross-sectional and time-series price would increase. However, it contradicts with data. Researchers have examined. These former previous studies. literatures studied the relationships between certain In the most literatures which considered the factors or group factors and the stock return, previous return, had negative regression coefficient. such as relationship between macroeconomic They explained it by the concept that the return of firm specific factor and stock return. In this on the stock market is a mean reverting process. research we aimed to study the effects of both the By this we mean that when the returns exceed or underperform their historical average, then within 1 Richard.E.Oberuc, ‘Dynamic portfolio theory and management’ 2011 230 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 macroeconomic and firm individual factors on The empirical results using the light industry stock returns simultaneously using dynamic panel 14 firms’, 12 years’ data shown that the system data analysis. GMM had better result than difference GMM. In Reviewing former literatures, considered the both model the Arellano Bond autocorrelation factors that were significant. Among those factors, tests and Sargan test illustrated no evidence of 8 variables were chosen according to deal with model misspecification and the instruments were multicollinearity. Because of including the lag of valid. However, the statistical significances of the dependent variable and the time-invariant fixed variables were poor except interest rate. Maybe, it effect this study couldn’t use FE or RE model. Two is because of the sample size. The GMM models estimators for panel data, GMM and system GMM best fit for small T and large N samples. So, for were applied to examine the study. improving the result, we have to include more observations. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 231

FUTURE PROSPECT ANALYSIS OF ECONOMIC COOPERATION OF MONGOLIA AND NORTH EAST ASIAN COUNTRIES

Shinebayar.D, MSc Oyunbat. R, MSc

School of Economics and Business, Mongolian University of Life Sciences , Mongolian Institute of certified public accountants Email:[email protected]

INTRODUCTION. The issues of whether Foreign trade in many countries, especially Mongolia should belong to East Asia, Central Asia, exports, has contributed to Mongolia's GDP growth. Northeast Asia, and foreign policy orientation have Imports are consist of Russia 3.6 percent, China been faced since that Mongolia has been made 13.3 percent, Japan 11.7 percent, Korea 7.5 percent, an independence decision in the globalization and United States 6.9 percent and Germany 5 percent. zoning wave of the world. As a geographically, Mongolia is located in RESEARCH METHODOLOGY the heart of Asia and landlocked country between Inter-sectored balance of sectors in 2010, 2013 Russia and China. and 2015, cross- sectored balances, statistics on In terms of geography and geopolitics, foreign trade of Mongolia and Statistics of Border Mongolia relates both to Northeast Asia and Protection are used in that research report. Central Asia. Since the regional policies have The results of the survey were analyzed been implemented in 1990s, and studies of our using cross-sectoral balance analysis, structural researchers have shown that Mongolia has belonged analysis, correlation and simulation models and to North-East Asia. were developed by graphs, spreadsheets and According to the decree tenth of the comparisons. Mongolian Parliament, in the Article 14.3 of the "Foreign Policy Concept" is “to develop friendly MONGOLIA’S TRADE WITH THE bilateral relations and cooperation with other Asian COUNTRIES IN THE NORTHEAST countries, to participate in multilateral cooperation ASIA and to support the policies and activities aimed at Mongolia exported commodities and goods strengthening strategic stability in Asia Pacific, to 68 countries and imported products and goods East Asia and Northeast Asia”. from 160 countries in 1997. Total trade turnover Mongolia is perfectly capable of developing has reached to 10536.1 million dollars, comparing regional economic cooperation because it has no to the last year increased by 27.3 percent and political, geographical, and borders issues with any exports increased to 6200.7 million dollars which country in the Northeast Asian region. is presented by 26.1 percent growth. Mongolia has been pursuing an open economy Total percentage of Mongolia's trade with policy since 1990. An open economy policy is that Northeast Asian countries have been increased it does not impose restrictions on trade, continuously, comparing to the previous years. In labor exchange and capital exchange with 2000, foreign trade with Northeast Asia was in total foreign countries. 74 percent of exports and 63 percent of imports, in As a result of the open policy, our country’s 2017 foreign trade made between Mongolia and export consisted of 30 per cent of China, 21.9 per Northeast Asian countries was accounted for 84.8 cent of Switzerland, 12.1 per cent of Russia, 9.7 per percent of exports and 64.5 percent of imports. cent of South Korea, 8 per cent of the United States The Government of Mongolia has entered and 3.8 per cent of United Kingdom and Japan into an Economic Partnership Agreement with respectively in 1997. Japan in 2015 and was implemented in June 232 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

2016, but there has not been shown the growth unpredictable change in two and three years in the volume of foreign trade between the two time. countries since 2017. The most important export Tourism is one of the fastest-growing sectors products such as agricultural products named of the global economy and is globally recognized wool, cashmere and potatoes, sea buckthorn as a gateway for growth and investment to increase oils and Mongolian traditional home ger are the foreign currency flows and support the sustainable taxable products for Japanese market. socio-economic development. According to the results of balance of payments As at end of 2017, 471094 tourists visited to between the Mongolian industries /at prices in Mongolia, comparing it to the previous year, increased 2015 /, direct export impacts are relatively high in by 13.21 percent. Total number of foreigners transport and warehouse operations, wholesale and visited to Mongolia as a tourist in 2017, was 30.6% retail trade, machinery and motorcycle repair and from China, 22.7% from Russia, 15.9% from Korea, service sectors. Indirect impacts are mainly high on 4.8% from Japan and 26 % from other countries. metal ore mining, coal mining and transportation, The study shows the number of tourists from China wholesale and retail trade and technical repairs is likely to decline. However, number of tourists sectors. Our main export sector is mining from Russia, Japan and South Korea have been then are followed by sectors such as transportation relatively stable in last decade. and warehouse operations, processing industry, professional science and technical activities and CONCLUSION trade. The results of impact analysis for exports 1. The mining and mineral sector’s products showed that export will increase by 1.09 units if have a major impact on the stability of the production in metal ore mining sector is increased structure in export. by 1.0 unit. If production in coal mining sector is 2. Oil products imported to Mongolia increased by one unit, exports will increase by influence the stability of the structure of 0.3 percentage points. In addition, if production imported goods. of the transportation and warehouse operations is 3. Sectors with high proportion of exports increased by one unit, its exports will increase by in the manufacturing sector of Mongolia 0.48 points and for the production of agricultural are mining and minerals which presents sectors increased by 1 units, will result in the 75,1-96 percent. But only 7.5 percent of growth by 0.08 points in its export. the livestock production and 3.2 percent of According to the results of input-output agricultural products is exported. analysis for imports, the increase in the final 4. Comparing to the results of analysis based product of transport, warehousing, construction on the inter-sectored balance as at prices and metal ore production sectors by 1 tugrug in 2010, 2013 and 2015, indicates that imports are increased by 74, 1.42 a) If Agricultural product increase by one and 1.02 tugrug respectively. Therefore, these unit, export will increase 0.18 units and sectors’ consumption are greater in imports. production in livestock and agriculture However, the increase in the final production of rise by one unit, export will be 0.08 , livestock and crop production by 1 tugrug was 0.01 respectively. increased by 0.26 and 0.39 turgug respectively. b) The result of input and output analysis The study of dynamic analysis shows us shows that there is no change in there are unstable and inconstant trend in the sectors with high demand for imports, structure of foreign trade for export and imports but rise in production of construction made between Mongolia and China, which is will give a rise in imports the one of the major trade partners in North 5. Mining, transport, warehouse operation East Asian countries. In details of dynamic and construction sectors which its main analysis for structure of imported and exported ingredients are imported from abroad, are goods from/to China presented that there was the major sectors of Mongolian economy. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 233

Therefore it presents that our major sectors 8. Most of the export products are are dependant from foreign market. It producedfrom mining sectors and growth is really beneficial in our economy to in this sector appears as a major influence produce substitute domestic product for on the other sectors. Moreover, to maintain imported inputs for ours dependent sectors the sustainable developments, there should to decline its cost of the production. be increase in investments into the sectors 6. The research study shows that our main that produce value added production. sectors such as livestock and agriculture 9. Foreign investment into Mongolia has sector are not dependent from foreign decline rapidly the recent years but the markets because of its production’s inputs level of direct investment among Northeast imported from abroad, are 2.5 and 12.5 Asian countries remain constant. percent respectively comparing to other 10. In conclusion, it is a necessary to raise sectors. the direct investments to contribute for 7. Future regional trade agreements should value added production sectors while the be made at the government level based on implementing economic cooperation in the advantages of export of Mongolia and Northeast Asian counties. imports of North east Asian countries 234 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

INFORMATION NOTE

1. MEETING VENUE The event will be held at Conference Hall of Corporate Hotel and Convention Centre located on Mahatma Gandhi Street-39, 212513 Ulaanbaatar, Mongolia

2. CONTACTS Altantsetseg Ser-Od Bilguun Ganbold Vice Dean International Relations Officer School of Economics and Business School of Economics and Business Mongolian University of Life Sciences Mongolian University of Life Sciences Email: [email protected] Email: [email protected] Tel: +976-9906-0801 [email protected] Tel: +976-98982262 3. HOTEL ACCOMMODATION Followings are the recommended hotels for International Scientific Conference 2016 participants

Corporate Hotel and Convention Ulaanbaatar Hotel Centre

Ulaanbaatar Hotel, Corporate Hotel, B.Altangerel's street-7, Mahatma Gandhi street, 15th khoroo, Ulaanbaatar, Mongolia Ulaanbaatar https://www.ubhotel.mn/ http://corporatehotel.mn/

We have made for hotel reservations only for participants who have officially invited to the international conference.

4. LIAISON OFFICERS Liaison officers will be appointed for each organization. All questions regarding the Liaison Officer may be directed to [email protected] or [email protected]

Please see Liaison Officer Table at Appendix 1

5. INTERPRETATION During the meetings, simultaneous interpretation will be provided in English language. The official languages of the International Scientific Conference 2018 are Mongolian and English.

6. WEBSITE OF THE INTERNATIONAL SCIENTIFIC CONFERENCE 2016 The official website of the international Scientific Conference 2018 will be updated with information about the meeting http://seb.muls.edu.mn/conference

7. TRANSPORTATION Transportations schedule will be available at the information desks at the hotels.

8. INSURANCE Personal and medical insurance is responsibility of the individual participants The secretariat will not be responsible for any medical costs. SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 235

9. DRESS CODE Business attire is required for formal applications and social events.

10. CURRENCY AND BANKING The national currency is the Mongolian Tugrik (MNT). Currency exchange rate is approximately (2018.06.13) according to Central bank (Commercial bank): 1 Euro = 2847.6 MNT (2863.0 MNT) 1 Dollar = 2414.45 MNT (2421.0 MNT) 1 Yuan = 377.10 MNT (378.4 MNT) Cash can be withdrawn for ATM anytime. Banks are open from Monday to Friday, from 09:00-18:00. It is possible to exchange money at currency exchange points in most hotels. Credit cards are widely accepted, except for small purchases.

11. TELECOMMUNICATIONS The international code for Mongolia is +976 and 11 for a land line in Ulaanbaatar only. You can purchase a local number from national operators. Please ask your Liaison Officers for further details.

12. Special Need Secretaries of Delegations should inform the Mongolian Secretariat [email protected] or [email protected] of guests with special needs in order to make necessary arrangements in advance.

13. WEATHER Weather in June from 19th – 22nd

14. SMOKE FEE POLICY Smoking is forbidden in all public places, restaurants, bars, public transport and etc 236 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

15. EMERGENCY CONTACTS Please contact your liaison officer in case of emergency. In case of further assistance please contact following officials from Mongolian University of Life Sciences

GENERAL EMERGENCY

Mr. Bilguun Ganbold (Russian) International Office Phone: +976-98982262 Email: [email protected]

Mr. Bilguun Ganbold (English) International Office Phone: +976-98982262 Email: [email protected]

Mr. Khishigdavaa Badarch (Chinese) Department of Accounting Phone: +976-99086562 Email: [email protected]

HOTEL AND TRANSPORTATION:

Mr. Bilguun Ganbold International Office Phone: +976-98982262 Email: [email protected] SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018 | 237

LIAISON OFFICERS

№ Countries Liaison officer Z.Undrakh 1 Austria Phone: +976 9199 7406 Email: [email protected] T.Erdenechuluun 2 Belgium Phone: +976 9909 2644 Email: [email protected] Ts.Gantulga Phone: +976 8800 5829 Email: [email protected]

D.Kadirbyek Phone: +976 9595 5996 3 China Email: [email protected]

B.Khishigdavaa Department of Accounting Phone: +976-99086562 Email: [email protected] B.Odonchimeg 4 France Phone: +976 8811 4813 Email: [email protected] D.Lhagvadorj 5 Germany Phone: +976 9905 5041 Email: [email protected] B.Ariunbold Phone: +976 8998 8339 Email: [email protected] 6 Hungary O.Amartuvshin Phone: +976 9901 3204 Email: [email protected] D.Tseveennamjil 7 Japan Phone: +976 9906 5089 Email: [email protected] G.Bilguun 8 Korea Phone: +976 9898 2262 Email: [email protected] T.Erdenechuluun Phone: +976 99092644 Email: [email protected] 9 Netherlands D.Kadirbyek Phone: +976 9595 5996 Email: [email protected] L.Otgonjargal 10 Poland Phone: +976 9909 5517 Email: [email protected] G.Bilguun 11 Russia Phone: +976 9898 2262 Email: [email protected] 238 | SCIENTIFIC JOURNAL-AGRICULTURAL ECONOMICS - 2018

J.Suvdaa Phone: +976 9191 9559 Email: [email protected] 12 Slovakia Ts.Tserendavaa Phone: +976 9937 3010 Email: [email protected]

International organizations

14 FAO /Food and Agriculture Organization of the United Nations/

15 UNDP /United Nations Development Programme/ S.Altantsetseg Phone: +976 9906 0801 16 SDC /Swiss Agency for Development and Cooperation/ Email: [email protected]

17 Other international organizations