Two years ago, over 300 special Anti-Corruption Agency officers apprehended former president N.Enkhbayar after he came home, for an arrest based on corruption charges. At dawn, black-masked officers entered his home and carried him outside, holding him in the air by his legs and arms and taking him to prison.
At that time, everyone saw only his two feet sticking up in the air wearing Made in Mongolia socks. From this appearance, the socks became famous and their sales increased.
When the owner of this sock company, D.Lkhagvajav, was a child wearing Russian socks, his father wore long white strips of cotton to wrap his feet or Chinese socks. His grandfather wore hand-knit socks made by his grandmother. Now he is over 40 years old and wears his Made in Mongolia socks. Almost every Mongolian household has at least one family member who wears his socks made from camel wool.
D.Lkagvajav lived in South Korea for eight years. When he was there, he learned about factories. He wasn’t able to make a large investment, all his savings were only 50 thousand USD, but he saw that a sock factory could be appropriate and calculated that socks could be made inexpensively. When he returned to Mongolia, he brought with him two knitting machines and some related items for the price of 20 thousand USD.
After that, he faced troubles buying land to build a factory.
He needed to be connected to electricity, and for that he had to go to the three or five state organizations and wait a long time. He was the owner of a medium sized enterprise that needed to connect to a 380 volt power source and some people wait one or two years for approval. According to him, this is a failure of government agency services and only the state can release new regulations. When a businessman can assemble all of their documents they can connect to 380 volts. This is how the government supports businessmen.
The second challenge he faced was that a resident of Mongolia cannot build a factory on their private land. But most Mongolians build their factories on their land, even though it is forbidden by law. He is charged two million MNT every year for using private land for non-designated use. He believes that if the state released new regulations that allow residents to build factories on their private land, it would be easier for businesses.
The third challenge was human resources. When he transported several containers from South Korea in 2005, he called all his relatives and 28 people came to help him. He says, “Now when I transport containers again, when I call them, everyone says they are busy and can’t come to me. I see that people have no free time and work hard to reach for their dreams.”
Generally, the founders of small and medium sized businesses need to work as a custodian, accountant, director, and human resources manager. As for D.Lkhagvajav, he thinks about Japanese human resource policy, like directors giving their employees six months for vacation, and during this time they can enroll in training and professional experience at their leisure. After this time has passed, he can push them to work harder and his employees can gain professional development training.
He says, “Actually, when I went to South Korea, I did not understand very well. They seemed like they were working pretty hard, and for a while I followed the traditions and livelihood. After I understood that they were adhering to a strict policy. There, if someone does not work for one day, they can face bankruptcy. Every Korean lives in that kind of business environment, they don’t have any chances to sit back from work or spend time at other entertaining events. As for Mongolians, they are very different. If someone has not earned money for a whole month, that person still has fancy clothes and walks with a smile on the street.”
Now, we are wearing 50 percent imported socks and the other half are made in Mongolia. Sock factories import 90 percent of their raw material from South Korea and 10 percent from China. Basically, they have an opportunity to produce domestically. But first they are planning to produce yarn designated for sock making material. Mongolia has rich wool resources, and can produce wool yarn. As for the cotton, South Korea does not produce it and foreign countries import yarn from others, like us. That’s why producing yarn is so expensive.
Chinese factories produce fake socks that look like famous factory brands. In Narantuul Market people sell these fake socks for 2,500 MNT, two times cheaper than original, Mongolian socks made from camel wool. It is impossible to control the sale of these fake socks and it may be a long time before the black market is shut down. Business is competition, his company does not put out regular advertisements, it depends on its policy of only producing high quality socks. The quality is their advertisement, and they think there’s no need to spend money on announcements or television ads. But people only know the quality of their products when they wear them, or when they see famous Mongolians wearing them on international news.
D.Lkhagvajav’s factory only can fix small problems, but not big ones. He still needs designers to meet his human resource needs. Most sock factory managers believe that in 30 or 40 years Mongolia will be able to fully meet the needs of its national sock consumption.
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