Cashmere’s journey from Mongolia to Multrees Walk www.heraldscotland.com

THE marriage between Mongolia and Multrees Walk - the Edinburgh avenue where Harvey Nichols and Louis Vuitton are neighbours - has to be sustainable, says Simon Cotton.

The chief executive of the luxury knitwear firm Johnstons of Elgin - which has just opened a flagship store in the Scottish capital’s exclusive shopping precinct - has set up a critical link between its mills and the cashmere farmers of Mongolia who supply the raw materials for their products that are sold under their own brand and for names like Burberry, another Multrees neighbour.

The 222-year-old firm is also investing in its Scottish future with a new £500,000 development centre set to open in Hawick later this year where it will centralise the design of new techniques and new types of fabric.

Mr cotton, 49, said there is growth across the company, which now has five stores in the UK, with others located on London’s Bond Street, in mills in Hawick and Elgin, and in St Andrews, and a further store could follow.

He said: “There’s two sides to our business. We have our own brand, and that’s about a third of our turnover.

“We have the private label business where we manufacture for other brands. Both sides have been growing.

“On the private label side, it’s been about having fantastic relationships with the best brands in the world, which we are doing very well, and we make iconic products for them, which the customers want.”

The firm tends not to mention private clients but customers such as Burberry are happy to make the association in their accounts.

“On the brand side, it has been very much about that new consumer interest in authenticity, and brands that have a provenance and a history.”

The firm sources merino wool mostly from Australia and cashmere from China, Mongolia and Afghanistan.

He said: “I was involved in the setting up of an organisation called the Sustainable Fibre Alliance.

“Ourselves and a few other companies set this up to work in Mongolia particularly on the sustainability of cashmere, and just making sure that the nomadic herders that produce it are able to deal with issues like the challenges of global warming, because they’ve got warming there of 2.8C.

“That’s affecting the grassland, increasing animal numbers are affecting the grassland. The nomadic herding practices that have been in place for centuries really now have to deal with a lot of new challenges.

“Cashmere is a great, romantic story. You know, wild goats roaming the grasslands and all that stuff. But if we want that to be around for the next 100 years, we’ve got to support the people and the supply chain.”

Claimed as a world first, it has introduced lighter weight technology which it says allows customers to wear knitted products year round.

Last year the company committed £4.5 million, an 800 per cent increase from 2012, to introducing its new technology and R&D capabilities.

Owned by the Johnstons for the first four generations and then the Harrison family since 1920, it last year booked £9.9m, profit before tax, a 59% increase year-on-year.

The firm employs 1,000 over its Hawick and Elgin mills, and is responsible for one third of Scotland’s textile apprentices.

It again looks to the future by running school visits, with 2,500 children seeing the mills each year. “They’ll do tours, but they’ll also do face to face interviews with young people in the company. They’ll do hands-on projects as well. So really, it’s trying to engage with the next generation and let them see that textiles is a vibrant industry with a good future, which has not always been how it’s been portrayed.

“Obviously the industry as a whole has gone through some decline for a period of time, but there’s now definitely a resurgence as people get much more interested in things like authenticity and how things are made, who’s making the products, and things like that.”

The company says it has the most advanced weaving looms and knitting machines in the UK.

Mr Cotton said: “We’ve invested a lot in finer gauges for the weaving and the knitting. That’s to give us a more international appeal, more year-round appeal, and broaden our products, so it means that we can remain relevant to the private label customers regardless of what their fashion cycle does. But it also means that from our own brand, we can give a much wider range of products.

“The technology and investment in machinery certainly is part of it. Take, for example, the fine gauge knitwear, which we’ve developed, so a really fine knit where you can wear it under a suit jacket. We developed that with whole garment technology, so basically very little sewing required. It’s a product which is made almost entirely on a single machine. We did that in collaboration with a very high end, very well respected yarn spinner in Italy, and the Japanese technology leader in the sector, Shima Seiki. You needed all three parties to do that. Just buying the machinery on its own was certainly never going to get us there.

“We’re in the process of launching our innovation centre in October in Hawick, where we’ll have all our design team, all the technical developers, all our programmers together under one roof. The magic happens when you’ve got designers and technical people working together, and then you can do things which maybe can’t be done if you’re designing in one office and sending things down the modem to another office.”

He said so far Multrees Walk living up to expectations and some international shoppers are “engaged by the idea that there’s actually a Scottish luxury brand which can sit beside the Louis Vuittons and the Burberrys and the Max Maras very comfortably”.

Q&A

Q What countries have you most enjoyed travelling to, for business or leisure, and why?

A I have a particular fondness for Mongolia. Alongside two other companies, Johnstons was the original member of the Sustainable Fibre Alliance, which works with the nomadic herders in Mongolia to improve all aspects of the sustainability of cashmere production.

Q When you were a child, what was your ideal job? Why did it appeal?

A I don’t think I had a clear idea until I was in my mid-30s and realised I had the opportunity to lead a business.

Q What was your biggest break in business?

I joined Russell Europe Ltd as a marketing manager and, although incredibly hard at the time, I learnt very quickly as part of that process, and when we did achieve the turnaround it was extremely satisfying.

Q And your worst moment?

A For my first MD role in 2007 I took over a company that had never made a profit. I learned a lot about the value of “lean” in manufacturing and how to balance the need to fill factories with the need to stay profitable.

Q Who do you most admire and why?

A My wife runs a charity that brings to Scotland children from the areas of Belarus affected by the Chernobyl disaster. Somehow she manages to completely energise herself to work with the charity and can make some incredibly tough decisions when necessary.

Q What book are you reading, what music are you listening to?

A I am reading Alistair Gray’s new book The Game Changer and listening to a young local musician called Calum Jones – he has a fantastic future.

Q What was the last film you saw?

A My son Seth took me to see Spider-man: Into 
The Spider-Verse. I thoroughly enjoyed it.

Mongolia to host festival as reindeer population increases www.theasian.asia

Ulaanbaatar: Mongolia will hold a two-day festival next week to celebrate the latest increase in the number of reindeer in the country.

Gold purchase drops 20 percent www.zgm.mn

Mongolia’s gold purchase has decreased 20 percent compared to the previous year, according to the Bank of Mongolia (BoM). As of June, BoM purchased 7.5 tons of gold, down by 1.8 tons year-on-year. The Central Bank’s fulfillment of gold purchase reached 30 percent in the second quarter of 2019.

US-Mongolia relations lack healthy balance www.globaltimes.cn

Mongolian President Khaltmaa Battulga met US President Donald Trump at the White House on July 31. During the state visit, the White House said, "The US and Mongolia have agreed that their relationship has reached the level of a 'strategic partnership.'" On Thursday, US Secretary of Defense Mark Esper was in Mongolia where he met high-ranking Mongolian leaders. Why have Ulaanbaatar and Washington become closer recently?

As tension increases with China and Russia, US frequent interactions with Mongolia could be regarded as an attempt to create more pressure for Beijing and Moscow.

Following its democratic transition, Mongolia has shown a willingness to become a liberal and democratic country with the US as its role model. This is in line with US strategy and provides room for Washington to export its ideology and values to Ulaanbaatar, which aimed at Beijing and Moscow.

As the China-US trade war continues to escalate, reports say that China could slash its rare-earth exports to the US as a countermeasure. According to the US Geological Survey in 2009, Mongolia had 31 million tons of rare-earth resources, 16.77 percent of the world's total and second only to China.

Boosting ties with Mongolia could be a way for the US to show China it has found an alternative country that can meet its rare-earth demands. This would reduce US reliance on China in this regard.

By strengthening ties with Mongolia, the US is also attempting to upgrade Mongolia's status in Northeast Asia, giving Washington another channel to deal with the Korean Peninsula nuclear crisis. Mongolia has maintained solid relations with all countries in the region including North Korea, with few historical or territorial issues. Ulaanbaatar wants stronger ties with Washington to earn more respect in the region, at least from Tokyo and Seoul.

Moving closer to the US, Mongolia can reduce its security reliance on China and Russia.

Mongolia proposed a "third neighbor" policy in 1990, aiming to build relationships with countries other than Russia and China, and formalized its foreign policy and legislation. Mongolia has been seeking to reduce its political, economic, and security reliance on the two giant neighbors by this "third neighbor" foreign policy.

As a superpower, the US has been Mongolia's most valuable "third neighbor." In Northeast Asia, Japan and South Korea are Mongolia's "third neighbors" in an economic sense.

Since Mongolia's democratic transition, China has been Mongolia's biggest partner in trade and investment. By cooperating with Japan and South Korea in investment, technology and trade, Mongolia wants to make its economy less reliant on China and Russia.

Beginning in 2000, the US began attaching great importance to Mongolia through people-to-people exchange and cooperation. Washington will continue to infiltrate Ulaanbaatar with its ideology, grooming officials in line with US values.

In the short term, however, it will be difficult for Mongolia to change its interdependent ties with China. As long as the two countries respect the core interests of each other, their bilateral cooperation in politics, economy, culture and military under the framework of China-Russia-Mongolia Economic Corridor and the China-proposed Belt and Road Initiative (BRI) will advance steadily. The border region between the two countries will remain stable and usher in continued development.

The US-launched trade war against China has influenced global economic development.

Washington's unilateralism has not received widespread approval from the international community, while China's BRI and proposal for a community of shared future for mankind have gained global acceptance.

The US development model has encountered multiple challenges and now Mongolia must make a rational stance between the two giants.

The author is director of the Russia and Mongolia research institute of the Inner Mongolia Academy of Social Science. opinion@globaltimes.com.cn

Rio asks Mongolia for clarity as funding challenge mounts www.afr.com

Securing funds to cover billion-dollar cost blowouts on Rio Tinto's Mongolian copper project will be difficult unless lawmakers in the country clarify their stance toward the project, according to the man in charge of the mine.

The comments from Oyu Tolgoi LLC chief Armando Torres came as an outspoken investor in the struggling Mongolian project reduced its exposure, and as Rio and BHP's plan to build a new copper mine in the US state of Arizona took a step forward.

The busy time for Rio's copper division comes as Rio chief executive Jean-Sebastien Jacques travels to Western Australia this week to inspect efforts to recover from poor performance at the Brockman mines this year.

A $US5.3 billion ($7.8 billion) underground expansion of Oyu Tolgoi is now expected to cost between $US6.5 billion and $US7.2 billion on the back of major delays and a design rethink.

Rio and its partners in the mine have started talking to lenders about increasing the existing $US4.4 billion finance package for the project, but Mr Torres indicated that could be difficult amid the uncertainty created by a review of the project agreements by Mongolian parliamentarians.

The parliamentarians are examining multiple aspects of Mongolia's relationship with Rio and the mine, which was formalised in major agreements in 2009 and 2015.

Speaking at a press conference in Mongolia on Thursday evening, Mr Torres urged the parliamentarians to clarify their stance swiftly.

“Timing is of the essence because we need to go to markets,” Mr Torres was quoted as saying by Bloomberg.

''Without conclusions, it’s difficult to secure additional funds.”

Oyu Tolgoi LLC is a Mongolian company that directly owns the mine. It is 66 per cent owned by Canadian company Turquoise Hill Resources, which itself is 50.79 per cent owned by Rio.

While Rio, Turquoise Hill and Oyu Tolgoi LLC are expected to make use of extra debt, the scale of the cost blowouts has raised fears that Turquoise Hill may have to conduct a dilutive equity raising.

Those fears have sparked a savage slump in Turquoise Hill shares, which have lost 81.5 per cent of their value over the past year, and on Friday were trading at their lowest price since December 2000.

Minority shareholders have been frustrated by the level of control Rio wields at Turquoise Hill, and the most outspoken minority shareholder, Sailingstone Capital, has been selling significant amounts of Turquoise Hill shares over the past year.

Regulatory filings suggest Sailingstone held 258.1 million shares in Turquoise Hill on August 31, 2018, but that stake had fallen to 146 million by July 31, with the bulk of the selling occurring within the past five months.

Sailingstone's stake in Turquoise Hill is now 7.26 per cent, according to Bloomberg data.

Rio is hoping to build a copper mine of similar size to the expanded Oyu Tolgoi mine in the US state of Arizona, and those plans took a step forward over the weekend with the publication of a long-awaited environmental impact statement (EIS) for the Resolution copper project.

Rio owns 55 per cent of Resolution, with BHP owning the other 45 per cent, and the project aims to mine a deep underground deposit close to the historic Magma copper mine that BHP acquired in 1996.

The EIS claimed the project would "increase average annual economic value added in Arizona by about $US1 billion", and said it would deliver annual revenues of about $US200 million to the US federal government.

Resolution is expected to produce 40 billion pounds of copper in concentrate over 40 years, including molybdenum byproducts, via a panel cave more than 2000 metres underground.

If the mine produced at a consistent rate over those 40 years, annual production would be about 450,000 tonnes per year.

The project will partially occur on lands that are sacred to traditional landowners in the region, and the EIS suggests some historical artefacts and human burial grounds could be disturbed by the mine.

US presidential hopeful Bernie Sanders has been a vocal opponent of the project, and earlier this year helped to introduce legislation that would reverse a land swap struck under the Obama administration that was crucial for the project to proceed.

Public hearings into the Resolution Copper EIS will begin next month, and US regulators are scheduled to deliver a draft decision in mid 2020.

A final decision from the regulators is expected around Christmas 2020, meaning the project will not have secured permitting when Americans go to the polls for the 2020 presidential election.

While it is not the operator of the Resolution project, BHP told investors in May that it does not expect "execution" of the project within five years.

BHP said it expected its share of capital spending on Resolution to be less than $US3 billion,

With an expected rate of return of about 15 per cent, BHP said Resolution was a relatively "low risk, low return" project with ''attractive'' copper grades.

Copper was fetching $US2.59 per pound on Sunday.

Tank biathlon semi-finals: Russia, Venezuela, Mongolia and Belarus battle it out in Alabino www.live.ruptly.tv

The Army Game’s Tank biathlon semi-finals continue in Alabino on Monday, August 12, as Mongolia, Russia, Belarus and Venezuela compete to show their abilities in different skills, such as driving and firing.

German Ambassador to Mongolia presents diplomatic credentials www.montsame.mn

Ulaanbaatar /MONTSAME/ President of Mongolia Kh.Battulga received diplomatic credentials from Ambassador Extraordinary and Plenipotentiary of the Federal Republic of Germany to Mongolia Jörn Rosenberg on August 9. Following the presentation of the letter of credence, the Ambassador was received by the Mongolian President, who expressed his gratitude towards the consistent support of the Government of Germany for the democratic and market changes and reforms of the 1990s in Mongolia from the very beginning.

Spy chief’s trial – Justice Minister to attend www.news.mn

A trial of nine people including B.Khurts, the controversial former director of Mongolian’s General Intelligence Agency (GIA) and former Attorney General G.Erdenebat is scheduled for 12 August at the Tuv Province Criminal Court.

Mongolian Airways Cargo expands freighter fleet www.news.mn

Startup carrier Mongolian Airways Cargo, which just last month received its first aircraft, a 737-300F, is acquiring its second 737-300F and is expecting to add it into the fleet early next month after maintenance work is completed. The company is also looking at 767 freighters as part of its business plan.

A 'victory' for Mongolian foreign policy www.montsame.mn

Last week marked an important milestone for not only US-Mongolian relations, but also for Mongolian foreign policy. The declaration on strategic partnership between Washington and Ulaanbaatar was signed during President Kh. Battulga’s visit to the US on July 31, 2019, making Mongolia the 17th country to sign such an agreement with the US.

It has often been argued Mongolia is a small, developing country with an annual GDP of only USD 12 billion, sandwiched between two huge authoritarian regimes with nuclear capabilities; hence, the nation is in no position to attract the interests of the US at a level high enough to warrant a strategic partnership. Nonetheless, Mongolia succeeded in securing its biggest and most crucial step to date in consolidating its Third Neighbor Policy focused on expanding relations with the Western world. Although it could be claimed the initiative was extended from the Mongolian side initially, without any concrete interest from the US, there would be no agreement. This raises an interesting question: how did a land-locked, impoverished nation with a population of only 3.2 million come to be recognized as a close ally and respected friend of Uncle Sam?

In 2003, Mongolia announced it would employ zero tolerance policy against terrorism and pledged to support the War on Terror, which was a key breakthrough in relations between the US and Mongolia. Since then, Mongolia has deployed thousands of military personnel to UN Peacekeeping and NATO-led missions. The fact that Mongolia has consistently increased the numbers in troops deployed as well as their commendable high standards and discipline gained Mongolia the trust of the US. This manifested in President Bush’s visit to Mongolia in 2005, which was recognition and encouragement of the support of Mongolia in counter-terrorism. Mongolian practitioners of foreign policy seized this momentum, and in retrospect, it can be said they laid the foundations for the diplomatic and military relations between the two countries upon which talks of strategic partnership could be commenced. This demonstrates that Mongolian foreign policy has been steered with prudence, despite the internal political situation being anything but.

Now let’s move the lens to the US perspective. America has a number of solid reasons to form a firm hand shake with Mongolia in the scope its Indo-Pacific strategy.

The US prioritizes sovereignty, security and stability as the main pillars of prosperity in the region. The US Department of Defense claims this notion is being jeopardized by China’s “assertiveness.” The growing Sino-Russian partnership, which seeks to re-order the region – especially to China’s advantage by aggressive joint military exercises– influence operations, and employs predatory economics to coerce other nations, is a major concern for the US. Secretary of Defense Mark Esper reiterated this during a news conference in Sydney on the 4th of August and said the US is firmly against China’s “destabilizing” behavior in the region.

China’s Belt and Road initiative (BRI) is an ambitious, gargantuan plan to re-route and dominate global trade involving trillions of dollars. Many analysts argue the BRI is a cunning way of wooing countries into a debt trap, and the recent case of China’s taking the control of a Sri Lankan port shows similar consequences could be seen again in the future. China is building a ring of sea ports around the Indian Ocean and India, but the world’s largest democracy has somehow managed to stay out of this massive project. The US is aware of the prospect of a deepening Sino-Russian partnership and the growing effect of the BRI; therefore, the fact that the term Asia-Pacific has been recently changed to Indo-Pacific, as well as its firm stance against China in terms of trade issues, indicates how seriously the US is taking this matter.

While Mongolia has been supporting the notion of a trilateral economic agenda, or the China-Mongolia-Russia Economic Corridor, in the scope of the BRI since 2014, no tangible works have been done, which leads to the assumption that Mongolia may have major reservations about the BRI and China’s plan. Instead, Mongolia has pushed for the Third Neighbor Trade Act with the US, and if passed, it would enable the Mongolian cashmere and textile industry to enjoy duty-free treatment on garments exported to the US. This will also eventually enhance Mongolia’s competitive edge against the Chinese industry. Furthermore, Mongolia’s reserves of rare earth elements can be a viable option for the US to reduce its dependency on China’s rare earth supply as trade war tensions show no signs of alleviating.

Apart from this, another topic that worries the US is whether Mongolia is going to become a member of Shanghai Cooperation Organization (SCO), especially given that both China and Russia actively endorse Mongolia’s membership in the organization. Some officials contend that joining the SCO runs contradictory to Mongolia’s Third Neighbor Policy and drastically increases dependence on the two neighbors. Others say Mongolia should join the SCO to bolster mutual trust with its two neighbors. They argue India joined the SCO in 2017 and has been able to maintain its partnership with the US and other democracies, so Mongolia should be able to as well.

However, these proponents underestimate the peculiarities of Mongolia’s landlocked geographical location, which puts it in a situation with enormous geopolitical and economic pressure. Moreover, Mongolia as a nation does not have any pressing issues concerning terrorism, extremism and separatism that other SCO members have; hence, it would be, to some extent, illogical for Mongolia to rush towards full membership, at least for now. President Kh. Battulga’s made a clever remark during the 2019 SCO Summit in Bishkek: “Mongolia is exploring ways of increasing its participation in the organization.” The US will carefully observe Mongolia’s affiliation with the SCO in the future.

On the topic of regional security, something that has been often overlooked but has been getting on the international radar recently is Mongolia’s diplomatic efforts in Northeast Asia. It established strategic partnership agreements with three of the most powerful countries in the region: China, Russia and Japan. In addition, Mongolia is the only nation in Northeast Asia which does not have a border or territorial dispute and enjoys friendly diplomatic relations with all of the nations in the region. This certainly gives an edge to Mongolia in terms of diplomatic maneuverability.

Foreign Minister D. Tsogtbaatar said Mongolia has the potential to be a “bridge for talks between the US and North Korea,” which is not an unrealistic statement given the friendly diplomatic relation between Mongolia and North Korea since 1948. Despite a change in trajectory after Mongolia’s democratic revolution in 1990, the two countries still maintained mutually beneficial ties.

In the aftermath of the failure of the Six Party Talks, Mongolia put forth an initiative by forming the Ulaanbaatar Dialogue (UBD) on Northeast Asian Security, a regional forum for officials and academics. Although the UBD has no intent to compete with or substitute for the Six Party Talks, it certainly plays a role in mitigating distrust among the parties of the region in the absence of the Six Party Talks. Northeast Asian leaders are also supportive of Mongolia’s efforts to lead the discussion on harnessing the vast solar and wind resources in Mongolia in order to establish an interconnected regional power grid.

All these diplomatic accomplishments and efforts by Mongolia to enhance the stability and security of the region did not pass blindly by in the eyes of the US unnoticed. President Kh. Battulga’s visit to Washington and the declaration of strategic partnership with the US is a result of unwavering dedication by Mongolian diplomats over past few decades, and just perhaps, President Trump’s decision to name a Mongolian horse gifted to his son Barron “Victory” was an acknowledgement of Mongolia as a strategic partner and the attainment of its foreign policy objectives.

Dochinkhuu Sayan

D. Sayan has a BA in International Relations with a concentration on US-Mongolia relations and currently works at the Business Council of Mongolia (BCM) as its Director of Board Affairs. He was selected for the Fulbright Student Program (funded by US Department of State) in 2019 and is pursuing his graduate degree in International Relations in the US committed for enrollment in Fall 2020. His topic of research will be centered on peace-building and conflict resolution