On February 28, 2023, the Government of Mongolia and the Asian Development Bank (ADB) signed the Framework Financing Agreement for the “Aimags and Soums Green Regional Development Investment Program,” which was subsequently ratified by the State Great Khural (Parliament) of Mongolia upon the Government’s proposal.
The Aimags and Soums Green Regional Development Investment Program aims to establish sustainable, climate-resilient, low-carbon, and livable cities and settlements (aimag and soum centers), promote agricultural business development, support green regional development models and innovation in local areas, and help ensure the domestic supply of essential food products. The program will be initially implemented in the three western aimags of Mongolia—Bayan-Ulgii, Uvs, and Khovd. The program also promotes climate financing and private sector investment mechanisms that can be scaled up nationwide.
The program will be financed through a Multitranche Financing Facility (MFF) by ADB from 2023 to 2033. The total financing for the program is USD 735 million, and a financing agreement for the first tranche of USD 270 million has already been concluded.
Implementation Tranches:
Tranche 1: 2024-2029
Tranche 2: 2026-2031
Tranche 3: 2028-2033
The Aimags and Soums Green Regional Development Investment Program consists of four components:
COMPONENT 1 – Construction and Urban Development
Development of climate-resilient, low-carbon, and livable aimag and soum centers.
COMPONENT 2 – Livestock and Rangeland Management
Implementation of climate-resilient, high-carbon sequestration, and sustainable rangeland and agricultural practices.
COMPONENT 3 – GIRAF Fund Management
Provision of inclusive financing for the development of low-carbon, climate-resilient livestock and agribusiness value chains.
COMPONENT 4 – Project Management
Institutional capacity building and policy development to support low-carbon, climate-resilient territorial development.
PROJECT BENEFITS
Development of livable aimag and soum centers
Support the development of aimag and soum centers that are climate-resilient, low-carbon, and livable. Focus investments on priority infrastructure and services that attract low-carbon livestock value chain investments in targeted inter-soum centers. Activities will follow an integrated approach and include: affordable housing, centralized heating, drainage and flood protection systems, energy, roads, public buildings, solid waste collection, transport and recycling, wastewater treatment, and improved water supply systems. Low-carbon solutions such as renewable energy, energy-efficient buildings and housing, waste recycling, and wastewater treatment technologies will be supported. Upgrading ger areas and improving access to affordable housing in aimag centers will also follow a unified approach. Agriculture-industrial parks with engineering infrastructure and business incubator centers will be established to promote processing activities.
Implementation of sustainable rangeland management to support traditional livestock herding
Promote sustainable livestock herding through climate-resilient and high-carbon sequestration rangeland management. This includes supporting vulnerable herder groups in implementing sustainable livestock practices (e.g., improving grazing practices, adjusting herd composition, reducing herd size, and improving breeds). Investment subprojects for public benefit will be implemented by herders who are members of pasture user groups (PUGs) and signatories to rangeland use agreements (RUAs), based on inclusive herd management plans. Financial support and certification systems will be developed for participating herder cooperatives. Incentives for herd reduction will be introduced. Rehabilitation of irrigation infrastructure and water conservation solutions will improve fodder production and enhance herders’ capacity to cope with climate-induced water shortages. Animal health and veterinary services will be strengthened across the entire livestock value chain to ensure reliable disease control and traceability. Certification systems and improved herd quality and health will attract investments into low-carbon, climate-resilient livestock value chains and support linkages between certified herders, cooperatives, and buyers—thus improving and sustaining herder livelihoods.
Development of livestock value chains
Inclusive financing mechanisms will be established to build low-carbon, climate-resilient livestock value chains. The Green and Inclusive Regional Agribusiness Fund (GIRAF) will be set up to overcome access-to-finance barriers for small and medium agribusinesses in targeted areas.
- Provide long-term loans with below-market interest rates, grace periods, and flexible repayment schedules that reflect production cycles and seasonality.
- Introduce credit guarantee mechanisms to replace collateral, reduce lender risks, and lower interest rates to improve access to GIRAF loans.
- Support innovation grants for agribusiness entrepreneurs to develop new green products, processes, and business models.
- Strengthen backward linkages between certified herders/PUG cooperatives and agribusinesses through value-sharing mechanisms, ensuring sustainability of pasture management and promoting inclusive investments in agro-industrial parks.
Support for low-carbon agricultural policy development
Enhance institutional capacity and policies for low-carbon, climate-resilient agro-territorial development. Focus on strengthening government and key stakeholder capacity for effective program implementation and management.
- Develop soft tools and plans required for program implementation, including: inclusive herd management plans, low-carbon business development plans, ger area redevelopment plans, and certification and traceability systems.
- Support design and operationalization of measurement, reporting, verification (MRV), monitoring and evaluation (M&E) systems.
- Explore public-private partnership (PPP) models for managing affordable housing and agro-industrial parks.
- Strengthen government institutions to develop, implement, and enforce integrated territorial development, smart livestock and rangeland management, and urban planning policies. Conduct policy dialogue and advocacy to develop a replicable green agro-territorial development model for Mongolia and potentially for other Central Asian countries. Explore partnerships for climate-resilient rangeland management in Central Asia.
