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Two Brothers Conquer Mongolia's Free-Market Wild West

This article is more than 10 years old.

The wristwatch is the first giveaway. A solid gold Piaget surrounded by a corona of diamonds. This is no ordinary Mongolian businessman. Tserenjigmed Dagvadorj and his younger brother Ganbaatar preside over the Max Group, a blossoming conglomerate.

They began in the late 1980s to trade underground in skins and furs amid waning Soviet domination. Today in Mongolia’s free-market Wild West you find their Max Supermarkets and milk bottler, Berlinburger fast foods, Maxipot restaurants, Max Roads (construction), Max Windows (windows and doors factory), Max Urguu (real estate development and construction), hotels (including the capital Ulaanbaatar’s newest, the Ramada, whose first guests were the 100-member advance party for Vice President Joe Biden), retail shops from clothing to furniture, the new Max Center shopping mall, with a second on the way (to house their retailing enterprises) and, of course, Max Mining, a couple of gold digs.

All told the brothers, on behalf of a wider family, control 650,000 square feet of commercial space in Ulaanbaatar, employ more than 2,000 people and last year reached $42 million in sales. (The dairy, called Suu) On the side the Dagvadorjs have 500 racehorses in Mongolia, goodwill currency in a land where such animals have crisscrossed the steppes since the days of Genghis Khan. (Plus: Thoroughbreds in America. Mongolian Star, one of their 2-year-olds, is the first Mongolian hope for the Kentucky Derby.)

Max Group and the brothers Dagvadorj are metaphors for today’s Mongolia. Connections, foresight and hard work coupled with just a dollop of luck and chutzpah-- not necessarily in that order--can make someone rich in short order. The nation is in full surge of resource-fueled development, luring Western investment bankers to the few first-class hotels, hoping to cash in.

Herders from the remote countryside, whose lands suddenly promise a bonanza of gold, copper or other minerals, wear long duster coats and thick riding boots. They swagger through the Max Supermarket, shelves stocked with Hungarian sausage and French brie. Traffic snarls for hours on Peace Avenue, Ulaanbaatar’s main drag, where barely three decades ago only an occasional Russian-made Lada might be seen. Nearly half the population of Mongolia has converged on the capital, where hundreds of thousands live in squalid camps of gers (the round felt Mongolian tent) or cramped shacks--representing a sharp and widening gap between rich and poor.

At each stage of their extraordinary saga the Dagvadorjs have sought to fill growing wants. “If you were going to single out the half-dozen most significant business families in Mongolia, the Max Group would have to be among them,” says Michael Aldrich, who runs the Ulaanbaatar office of Hogan Lovells and is the most prominent international lawyer in Mongolia.

The brothers, born in Ulaanbataar, spent long stretches of their youth 700 miles to the southwest, deep in the countryside, two days away by four-wheel-drive car across dirt tracks. As young teenagers riding the same powerful Mongolian horses they’d mounted as small children, they began collecting marmot skins from trappers. At times they trapped the critters themselves. They learned to sew the pelts into high-quality finished coats and hauled them into Ulaanbaatar to peddle.

“This is how we first came to understand that business has some very substantial incentives, and we were able to begin accumulating funds,” 44-year-old Tserenjigmed smiles, at lunch in the gleaming restaurant of his Ramada Hotel.

The communist era was dying but not safely dead. “Private business was prohibited,” Tserenjigmed recalls. But they pressed on, smuggling a wider selection of stitched goods across the [still today] loose frontier into Siberia, then selling them along the rail route to Moscow.


The volume picked up in 1991, when capitalism arrived like a whirlwind. On the Trans-Mongolian Railway the brothers would exhaust their supply on each trek. “There was nothing really to bring back,” Ganbaatar, 42, recalls. “We just came back with money.” And the money--from markups of three or four times--they promptly reinvested.

In China they found supplies of cheap ready-made clothing, and now the brothers figured they’d take their crammed train compartment direct to Russia, where there was considerably more disposable cash. But “direct” was not fast. The ride first from neighboring Inner Mongolia, eventually from Beijing to Irkutsk, capital of Eastern Siberia, was at least three days in the best of weather, another five days on to Moscow. So the brothers turned to planes, and when the Chinese limited baggage to 55 kilos in 1993, they began chartered flights. They were doubling, even tripling their investment on each trip--and not bothering with visas or declarations.

Increasingly savvy Russian customs officials began looking carefully for the large stashes of cash coming back to Mongolia. “If they found it, they just confiscated,” Tserenjigmed smiles thinly. “It can also become a court case, but we were lucky that did not happen to us.”

As Mongolia itself stirred, the Dagvadorjs retrained their sights at home. Most of the country was still lurching around in ancient Soviet-era Ladas or Moskvitches, rattletrap relics of communism. But Mercedes and BMWs were on top of the wish list of every newly minted mogul. Using a network of Mongolian students in Czechoslovakia and Germany, by 1994 the brothers began buying used cars of both makes, driving them part or all of the way to Ulaanbaatar.

As they eventually moved to rail transport, they fell on another profitable trade--high-quality German furniture. In each shipping container they piled the desks, chairs and tables around the autos. Then came preserved food and soft drinks bought wholesale from Germany’s huge Metro chain, one of whose executives had sold the brothers his Mercedes to ship back to Mongolia.

Back home this payload launched them into retailing. Renting an unused corner of an Ulaanbaatar public library, they began selling their wares to a varied clientele. This turned into the Max Supermarket chain and the Euromebel Furniture stores, along the way becoming official distributors for everything from Budweiser beer from Czechoslovakia to Malaysian hardwood furniture. By 1996 they’d bootstrapped themselves into buying their first building, next to Independence Square. It became the first of the Berlinburgers, today a mainstay of Ulaanbaatar.

Later came the doors and windows manufacturing for the thousands of apartments sprouting about the capital, and the road business, thanks at least partly to the family’s close ties with the mayor of Ulaanbaatar. “We are not politicians, not members of any political party,” says Tserenjigmed. “But very popular among Mongolians is horse racing, and we have a large number of racehorses. Through this common hobby we have connected with many politicians, many parliament members, who have become friends.” (Max Group also has won allies with charity toward orphans, for whom college trust accounts were established at an area bank.)

With Mongolia pegged by international lenders to have the world’s fastest GDP growth (12% next year, maybe faster beyond then), Max Group’s own goals to double revenues next year don’t seem so overdone.

Still, a bubble is a prospect that haunts the region. Ulaanbaatar’s skyline, crane-wise, has begun to approach Dubai at the height of its boom. If Tserenjigmed confesses a bit of unease, he is restored by the minerals prospects--and contemplating Max’s first bank financing.


The clan also is looking for big international names to fill malls like the new one next to the French Embassy off the main Sukhbaatar Square. Louis Vuitton is already in a competing center, last summer posting the highest one-month volume of any single LV store outside France.