Energy-efficient Greenhouse and Vertical Farm
Energy-efficient Greenhouse and Vertical Farm
Business Model Description
Invest in a year-round vegetable production through energy-efficient greenhouses and vertical farms, equipped with advanced and sustainable technological solutions and processing facilities. Examples of companies active in this space are:
Everyday Farm (EF) was established as a joint venture in 2012 to introduce Japanese agricultural and solar technology. Japanese Bridge LLC Along with operating Mongolia's second largest solar farm, EF operates a solar-powered greenhouse and cold storage, and is currently developing a winter plant factory. Everyday farm also resells farm equipment and tools.
Tugs Urgats LLC was established in 2016 with the first glass greenhouse with natural lighting with Dutch technology. The greenhouse, covering 10,080 square meters, yields 500-600 tons of cucumberharvest annually, which accounts for one fifth of the domestic consumption. In 2022, Tugs Urgats secured a 5-year concessional loan of 3.5 million USD from the Green Loan Fund of Khan Bank.
Expected Impact
Boost crop production via modern sustainable and energy efficient technologies to ensure annual supply of vegetables and fruits for local consumption.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Mongolia: Ulaanbaatar
- Mongolia: Darkhan-Uul
- Mongolia: Orkhon
Sector Classification
Food and Beverage
Development need
Mongolia has achieved significant progress in reducing the level of hunger, however, 22 percent do not have access to sufficient dietary energy on a regular basis to lead a normal, active and healthy life (1). The food and agriculture sector has significant potential to accelerate the economy as it is considered one of the main priority sectors, making up 13% of the country's GDP. (2)
Policy priority
Mongolia's Vision 2050 states the agriculture sector as one of the priority sectors for economic diversification (3). The relevant objectives of the Medium-term Development Plan include creating a healthy, comfortable and favorable living environment and ensuring safe food provision, and creating an export-oriented economy. (3)
Gender inequalities and marginalization issues
Rural migrant families in ger areas, the poor and those affected by the pandemic are most vulnerable to food insecurity. (4) 3 in 4 people experiencing food insecurity are from these groups (overall 12 percent). (5)
Investment opportunities introduction
In 2021, the agriculture sector contributed 13 percent of Mongolia's GDP and employed one-third of the country's workforce. (6 )The country expends approximately USD 440 mn per year on imports of food. (7)
Key bottlenecks introduction
Access to adequate finance to invest in new technology, as long payback periods and high risks limit cash flows and hinder rapid expansion. Additionally, high processing costs, expensive capital, and a shortage of skilled labor all present significant challenges.
Food and Agriculture
Development need
The country is suffering from triple malnutrition: severe food insecurity (12 percent), micro-nutrient deficiency and obesity among adults and children (23 percent). (8,9) While people are opting for healthy, organic food, domestic farmers are not meeting this increasing demand (7) struggling to compete with cheap imported products. Mongolia produces only 60 percent of its own vegetable consumption.
Policy priority
"National movement on ensuring food supply and security 2022-2027" aims to fully supply domestic needs with 19 main types of food products (10). While domestic small farmers supply a significant portion of domestic supply during warmer months, only larger businesses are able to invest in technology for year-round supply. (7)
Gender inequalities and marginalization issues
Due to the limited supply of vegetables in colder months, vegetable price increases from 40 to 120 percent. (11) Household Socioeconomic State of Vulnerable Groups revealed that 44 percent of the population reported their food consumption reduced due to price increases and vegetable products make up less than 10 percent of their food consumption.(12)
Investment opportunities introduction
Mongolia imports about over 40 percent of vegetables. (7) Domestic production of vegetables has increased by 20.9 percent over the last 5 years. Meanwhile, vegetable import growth from China to Mongolia was 25 percent YOY in 2021. Vegetable price increases significantly increases during winter months (30-100 percent), creating demand for winter farms. (13)
Key bottlenecks introduction
High processing costs and high cost of capital, and lack of skilled labor poses significant challenges in the food production sector. Furthermore, Low adoption of agricultural technology is among the main causes of low agricultural productivity. Meanwhile, volatile commodity prices affect both farmers and consumers (14)
Agricultural Products
Pipeline Opportunity
Energy-efficient Greenhouse and Vertical Farm
Invest in a year-round vegetable production through energy-efficient greenhouses and vertical farms, equipped with advanced and sustainable technological solutions and processing facilities. Examples of companies active in this space are:
Everyday Farm (EF) was established as a joint venture in 2012 to introduce Japanese agricultural and solar technology. Japanese Bridge LLC Along with operating Mongolia's second largest solar farm, EF operates a solar-powered greenhouse and cold storage, and is currently developing a winter plant factory. Everyday farm also resells farm equipment and tools.
Tugs Urgats LLC was established in 2016 with the first glass greenhouse with natural lighting with Dutch technology. The greenhouse, covering 10,080 square meters, yields 500-600 tons of cucumberharvest annually, which accounts for one fifth of the domestic consumption. In 2022, Tugs Urgats secured a 5-year concessional loan of 3.5 million USD from the Green Loan Fund of Khan Bank.
Business Case
Market Size and Environment
USD 50 million - USD 100 million
10% - 15%
Mongolian fresh vegetable market size amounted to USD 360 mn in 2022, and the market is expected to grow annually by 12.75 percent (CAGR during 2022-2027). (16) According to the Bank of Mongolia, the country spent ~USD 440 million on food imports in 2020. (17)
Indicative Return
10% - 15%
As per expert consultation and unpublished financial report from Everyday farm, the gross profit margin range from 10 to 15 percent.
Investment Timeframe
Medium Term (5–10 years)
In 2022, Tugs Urgats secured a 5-year concessional loan of 3.5 million USD from the Green Loan Fund of Khan Bank. (18)
Ticket Size
USD 500,000 - USD 1 million
Market Risks & Scale Obstacles
Market - Volatile
Business - Supply Chain Constraints
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
This IOA can play a vital role in promoting sustainable development by reducing reliance on unsustainable, intensive farming practices that use various agrochemicals, including insecticides and herbicides which are the main drivers of biodiversity decline and habitat degradation. (20)
This IOA can promote more healthful and environmentally-friendly farming practices. Numerous studies suggest that non-organic farming poses a risk to human health and contributes to the development of chronic diseases for farmers and people living in proximity to the field (20).
Domestic vegetable production promotes sustainable development by addressing inadequate vegetable and fruit intake and mitigating health risks associated with the overconsumption of animal-based foods.
Gender & Marginalisation
Assessments show that the global crisis has impacted vulnerable groups most significantly, reducing their consumption of vegetables and vitamin supplements. (8)
Border closures and restrictions caused by the pandemic disrupted the vegetable supply chain and drove up the price. Vulnerable groups are less likely to afford vegetables due to shortages and price increases. (12)
Expected Development Outcome
Increase productivity of agricultural production and enhance food security, reduced vegetable price volatility though year-round and steady supply.
Indoor and greenhouse farming can help reduce the risks in agricultural production caused by unfavorable weather conditions, disasters, pests, and diseases.
A winter greenhouse can provide fresh vegetables throughout the year, even in colder months when local outdoor produce is scarce. This can encourage people to eat more vegetables and improve their overall health and nutrition.
Gender & Marginalisation
Increase availability of locally sourced vegetables to help diversify nutrition and vitamin sources for the vulnerable population who cannot afford supplements.
Marginalized communities are often disproportionately affected by climate change and environmental degradation. Winter greenhouses can promote climate resilience by providing a reliable source of fresh produce in times of extreme weather events or natural disasters.
Winter greenhouses can create job opportunities for marginalized communities, particularly women. By providing training and employment opportunities in sustainable food production, winter greenhouses can help marginalized communities to become more economically self-sufficient with significant and positive nutrition and health outcomes.
Primary SDGs addressed
2.2.2 Prevalence of malnutrition (weight for height >+2 or <-2 standard deviation from the median of the WHO Child Growth Standards) among children under 5 years of age, by type (wasting and overweight)
2020: Overweight- 10.5, Wasting - 0.9 2018: Overweight - 9.4, Wasting - 0.9
National information not available as of Feb 2023. Global target: To end all forms of malnutrition, including achieving by 2025 the internationally agreed targets on stunting and wasting in children under five years of age, and address the nutritional needs of adolescent girls, pregnant and lactating women and older persons.
12.2.1 Material footprint, material footprint per capita, and material footprint per GDP
SO2 emissions embodied in imports (kg/per capita) - 2.0 (21)
Information not available as of Feb 2023.
8.1.1 Annual growth rate of real GDP per capita
Annual growth of GDP per capita in 2020 was -6.1 percent. (22)
As part of the Five Year Development Guideline, Vision 2050, the Government aims to keep the economic growth (annual GDP growth) at 6 percentby 2025.
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Public sector
Outcome Risks
Upgraded, scaled enterprises with energy-efficient greenhouses may push smallholder farmers out of the market.
Gender inequality and/or marginalization risk: Locally sourced vegetables may be more expensive to produce due to small-scale farming and higher labor costs. This can make them less affordable for vulnerable groups and increase the inequality gap.
Impact Risks
The lack of agronomists, plant specialists, greenhouse managers, and weak marketing and logistics capacities can lead to reduced crop yields, poor quality crops, and an inability to meet market demands, negatively impacting the profitability and success of a winter greenhouse farm.
Extreme weather conditions such as heavy snow, freezing rain, and strong winds can cause damage to the greenhouse structure, affect plant growth, and cause disruptions to supply chains.
If an outbreak occurs, it can result in significant plant damage, reduced yield, and the need for costly treatments due to the enclosed growing environment.
Gender inequality and/or marginalization risk: Greenhouses require resources such as land, water, and seeds which could limit the resources available for the rural poor.
Impact Classification
What
Modern, energy-efficient greenhouses boost crop production, improve the well-being of farmers and support the economy at large.
Risk
Customers lack awareness about the importance of organic, locally sourced vegetables. Thus, competition from cheap, imported vegetables may keep prices low and reduce potential profit.
Contribution
During the winter months, a majority of Mongolia's vegetable consumption relies on imports, which account for 48% of the country's total vegetable supply.
Impact Thesis
Boost crop production via modern sustainable and energy efficient technologies to ensure annual supply of vegetables and fruits for local consumption.
Enabling Environment
Policy Environment
State policy on food and agriculture aims to support local businesses introducing innovation to increase profit per animal and increase the level of primary processing of livestock raw materials and increase the production of value-added products. (3)
Under the recent government resolution on “food supply and safety”, the country is working to develop agricultural clusters and food production complexes. This initiative aims to secure a domestic supply of food and support the country to become a food exporter. (3)
Financial Environment
Financial incentives: Government of Mongolia has budgeted USD 18 mn for loans to develop winter greenhouses. (25)
Fiscal incentives: The Law on Corporate Income Tax provides for exemption with respect to the sale of imported equipment and machinery which is environmentally friendly and reduces environmental pollution and waste. Furthermore, Local agricultural products are exempt from export tax.
Other incentives: Commercial banks and financial institutions offer concessional loans for domestic individuals and businesses willing to invest in climate mitigation and adaptation technologies and services. (18)
Regulatory Environment
Mongolia established organic product standardization law in 2016 and standardized certification and labeling. Law is currently being reviewed with involvement from FAO. (23)
Law on Ensuring food safety indicates that Good Agricultural Practice (GAP) should be introduced in the primary processing of food products. (24)
Marketplace Participants
Private Sector
Corporates: Everyday Farm LLC, Tugs Urgats LLC Investors: Bridge LLC; Farmdo Co. ltd
Government
Ministry of Food, Agriculture and Light Industry (MOFALI), Ministry of Health; Ministry of Environment and Tourism
Multilaterals
Food and Agricultural Organization, United Nations Industrial Development Organization, Adventist Development and Relief Agency, Swiss Agency for Development and Cooperation
Non-Profit
Mongolian Farmers Association for Rural Development; Mongolian Women Farmers Association
Target Locations
Mongolia: Ulaanbaatar
Mongolia: Darkhan-Uul
Mongolia: Orkhon
References
- (1) Government of Mongolia, (2021) Towards Sustainable Food Systems in Mongolia. https://summitdialogues.org/wp-content/uploads/2021/09/ENG_sustainablefoodsystems_Mongolia_FSD_Pathway-document.pdf
- (2) Government of Mongolia. (2023) Economy of Mongolia. Invest in Mongolia. Economy of Mongolia
- (3) Mongolia's Long-term development plan "Vision 2050" https://legalinfo.mn/mn/detail/15406
- (4) United Nations in Mongolia. (2022). The United Nations Sustainable Development Cooperation Framework (UNSDCF 2023-2027) https://mongolia.un.org/sites/default/files/2022-07/SF%20Eng%20last%20version7-14.pdf
- (5) National Statistics Office. (2021) Indicators for food security statistics 2021. https://www2.1212.mn/BookLibraryDownload.ashx?url=Indicators_for_Food_supply_2021_en.pdf&ln=Mn
- (6) United Nations Development Programme (UNDP). (2022). Mongolian Sustainable Cashmere Platform. http://sustainablecashmereplatform.com
- (7) Asian Development Bank. (2020) Vegetable Production and Value Chains in Mongolia. https://www.adb.org/publications/vegetable-production-value-chains-mongolia
- (8) Food and Agriculture Organization. (2022). Socio-economic impact of Global Crisis in Mongolia. FAO Presentation retreived from https://drive.google.com/drive/u/2/folders/1IQR2oXZ61L015QVwS7hj_kig-3tEyrPyon Jan 16, 2022.
- (9) Global Nutrition Report. (2022) Mongolia Country Nutrition Profile. https://globalnutritionreport.org/resources/nutrition-profiles/asia/eastern-asia/mongolia/#:~:text=26.5%25%20of%20adult%20(aged%2018,and%2014.5%25%20of%20adult%20men.
- (10) Government of Mongolia. (2022) National movement on ensuring food supply and security 2022-2027 https://legalinfo.mn/mn/detail?lawId=16530824651591
- (11) Gogo (2020) INFOGRAPHIC: Vegetable price increase in winter and decrease in summer data. https://gogo.mn/r/16n0w
- (12) Economic Research Institute. (2023) A Rapid Assessment of the Impact of the War in Ukraine on Households and Businesses in Mongolia
- (13) Fresh plaza. (2021) Chinese Fresh exports to Mongolia see steady growth in Q1 2021. https://www.freshplaza.com/europe/article/9314984/chinese-fresh-exports-to-mongolia-see-steady-growth-in-q1-2021/
- (14) Food and Agriculture Organization. (2022). Socio-economic impact of Global Crisis in Mongolia. FAO Presentation retreived from https://drive.google.com/drive/u/2/folders/1IQR2oXZ61L015QVwS7hj_kig-3tEyrPyon Jan 16, 2022.
- (15) Mongolian Customs General Administration. (2021). Customs statistics. https://gaali.mn/statistic
- (16) Statista. (2022) Fresh Vegetables - Mongolia Retreived from https://www.statista.com/outlook/cmo/food/vegetables/fresh-vegetables/mongoliaon December 2, 2022
- (17) Central Bank of Mongolia. (2022). Mongolia Food Products Imports by country in US$ Thousand 2020. https://wits.worldbank.org/CountryProfile/en/Country/MNG/Year/LTST/TradeFlow/Import/Partner/by-country/Product/16-24_FoodProd#
- (18) IKON News. (2022) The winter greenhouse project will be financed with a green loan from KAAN Bank. https://ikon.mn/n/2h8j
- (19) Eagle. (2019) Food consumption and Import. Retreived from http://eagle.mn/r/61579on Jan 16, 2022.
- (20) Food and Agriculture Organization. (2019) Organic Agriculture and the Sustainable Development Goals: Park of the Solution. https://www.ifoam.bio/sites/default/files/nm19_329_report_sdg_lr.pdf
- (21) Government of Mongolia. (2019). Voluntary National Review Report
- (22) SDG Tracker (2022) Mongolia retrieved from https://sdg-tracker.org/economic-growthon Dec 2, 2022
- (23) Parliament of Mongolia. (2016). Law on Organic food https://legalinfo.mn/mn/detail/11884
- (24) Ministry of Food, Agriculture, and Light Industry. (2023). Policies https://www.mofa.gov.mn/branch/gazar_tarialan/616f940a73bc4a5fc70f21fb
- (25) Ministry of Food, Agriculture, and Light Industry. (2023). Greenhouse farming https://www.mofa.gov.mn/branch/gazar_tarialan/616fa22373bc4a5fc70f221a
- (26) Parliament of Mongolia. (2019). Business entity income tax law