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Mongolia: Country Report
Mongolia has significantly changed since it last controlled Eurasia under the leadership of the ruthless Genghis Khan. Following Chinese occupation and subsequent independence gained through Soviet-backed communist rebellion, Mongolia became a democratic state through peaceful revolution in the 1990’s. The Mongolian People’s Revolutionary Party (MPRP), renamed the Mongolian People’s Party (MPP) in 2010, has been the dominant political party but shared a coalition government with the Democratic Party from 2008 to January of 2012. Following the voting out of office of former Prime Minister Altankhuyag in 2014, Prime Minister Saikhanbileg united a grand five-party coalition in December 2014, which later dissolved into a three-party coalition in August 2015. However, as of July 2016, Prime Minister Jargaltulga Erdenebat has been head of government with the most recent elections yielding another dominating win for the MPP. The parliamentary government of Mongolia is made of 21 provinces spread over an area that includes only a portion of the historical Mongolian homeland. There are more ethnic Mongolians living in the Inner Mongolia Autonomous Region controlled by the People’s Republic of China today than live in present day Mongolia itself. Regardless, the country has considered itself independent since 1921 and has had a constitution since 1992. Mongolia's executive branch includes chief of state (president), currently President Tsakhia Elbegdorj, who is elected by popular vote for a term of 4 years as well as a head of government (prime minister) who is elected by the same procedure, offset by one year. The legislative branch elects 48 members directly from 26 electoral districts while 28 members are elected based on proportional representation corresponding to the total number of votes gained by each party. Each member of the unicameral state Great Hural serves four years.[1]
According to the CIA World Factbook, Mongolia’s GDP in 2015 amounted to $11.16 billion USD. Although Mongolia continues to grow, its economy has slowed down after a series of government missteps, and its total growth amounted to only 1.4% as of July 2016[2]. The composition of Mongolia’s GDP by sector breaks down to 14.6% being attributed to agriculture, 35.1% to industry and 50.3% to services[3]. Inflation has recently been solidly diminished, falling from 5.9% in 2015 to a low 2.4% in 2016[4]. Unemployment, on the other hand, has risen in recent years, climbing from 8.3% in 2015 to 10.4% in 2016. While some economic statistics suggest a promising future, such as an estimated 59.2% increase in the number of rural families with access to improved water sources, a large portion (21.6%) of the population of 2,992,908 (July 2015 est.) live under the poverty line. This could be related to the increase of the population, which has doubled in the last 40 years. Mongolia has relatively healthy population growth, though the fundamental needs of many in Mongolia are not being adequately met since access to sufficient energy, water and food sources is sub par. There are promising statistics: infant mortality rates have decreased dramatically with there being on average 21.8 deaths for every 1000 live births (2016)[5]. Mongolia’s age distribution is healthy as well with 69.02% of the population being between the age of 15-64 years of age, 26.87% under the age of 15 and only 4.12% over the age of 64. The median age in Mongolia is 27.5 and the life expectancy is 65.04 years for males and 73.76 years for females. Educational participation is at 120% (Due to individuals above or below the school attending age going to school along with those within the appropriate age range) and literacy is at 98.4% for the total population, a higher rate than some its Southeast and East Asian neighbors.[6]
Mongolia is connected to the international arena through international organizations such as the UN, WTO and the ICC, though it still has not submitted an ICJ jurisdiction declaration. Mongolia’s Current Account Balance is -$567 million USD by a 2015 estimate. Products being exported by Mongolia are essentially all natural resources, including, copper, apparel, livestock, animal products, cashmere, wool, hides, fluorspar, other nonferrous metals, coal, and crude oil which amounts to $5.272 billion USD total. Over 95.3% of these exports flow directly into China. The recent slow growth in Chinese markets has therefore directly contributed to Mongolia’s recent economic imbalances, as they are Mongolia’s most important foreign market. Import commodities include machinery and equipment, fuel, cars, food products, industrial consumer goods, chemicals, building materials, cigarettes and tobacco, appliances, and soap and detergent, amounting to a total of $3.923 billion in imports. Again, Mongolia’s largest import partner is its southern neighbor China.[7]
Moving Toward Democracy and Free Markets:
After the breakup of the Soviet Union, Mongolia’s economy suffered major difficulties. Accustomed to heavy subsidies from the Soviet Union, Mongolia had to adjust to surviving on its own in the world market. However, after several troubling period in the 1990s and early 2000s, Mongolia has begun to show positive trends. The Mongolian government has greatly supported the development of the free market, providing a $4.4 billion finance package in December 2015 to increase investor confidence.
Economic Structure:
§ Mongolia has recently been facing economic instabilities, with economic growth at 3.0% in the first half of 2015 as a result of a weakening commodity market and a slower growth in the Chinese market, in 2016, Mongolia only recorded a .1% increase at growth, staying around 3.1%.[8]
§ Mongolia has extensive mineral deposits, including copper, coal, molybdenum, tin, tungsten and gold. These constitute Mongolia’s primary exports and make economic growth highly dependent on the world market price of metals. The country is currently at an economic turning point as a result of the exploitation of these vast resources, which make up 20% of its GDP.
§ Analysts see the economy expanding 1.8% percent in 2017 and 3.8% in 2018.[9]
Economic Indicators[10]:
§ GPD (official exchange rate): $11.16 billion (2015 est.)
§ GDP Real Growth Rate: 0% (2016 est.)
§ GDP per Capita: $12,200 (2016 est.)
§ GDP Composition by Sector:
o Agriculture: 14.6%
o Industry: 35.1%
o Services: 50.3% (2016 est.)
§ Labor Force: 1.164 million (2015 est.)
§ Labor force by Occupation:
o Agriculture: 28.6%
o Industry: 21%
o Services: 50.4% (2014 est.)
§ Unemployment Rate: 9.4% (July 2016 est.)[11]
§ Population below Poverty: 21.6% (2014 est.)
§ Inflation Rate: 2.4% (2016 est.)
§ Exports: $4.319 billion f.o.b. (2016 est.)
§ Export Commodities: Copper, apparel, livestock, animal products, cashmere, wool, hides, fluorspar, other nonferrous metals, coal, crude oil
§ Imports: $3.003 billion c.i.f. (2016 est.)
§ Import Commodities: Machinery and equipment, fuel, cars, food products, industrial consumer goods, chemicals, building materials, cigarettes and tobacco, appliances, soap and detergent
§ Debt-external: $18.67 billion (2016 est.)
§ Economic Aid-recipient: $314,630,000 (2014)
Political Considerations:
§ Mongolia is divided into 21 provinces, called aymguud and one municipality with provincial status. The provinces are further divided into districts. The capital of Mongolia is Ulanbaatar, which is also the largest city.[12]
§ The government is classified as a semi-presidential republic. The executive branch is split between the President and Prime Minister. The current President of Mongolia is President Tsakhia Elbegdorj and the current Prime Minister is Jargaltulga Erdenebat.
§ The legislative consists of the State Great Hural, which has 76 deputies. The judicial branch is formed by the Constitutional Court. The legal code of Mongolia is based on Continental and Russian Law.[13]
§ The U.S. is committed to helping Mongolia in its progress, primarily in the economic and cultural fields. The US Agency for International Development (USAID) has provided over $150 million in order to encourage private sector-led economic growth and more effective and accountable governance. The US Department of Agriculture also provides food aid, and there are about 100 US volunteers serving in the country through the Peace Corps. In turn, Mongolia is committed to maintaining good relations with the US and has contributed troops to coalition operations in Iraq and Afghanistan.[14] Recently, the U.S. and Mongolia instated long-term development projects via a Millennium Challenge Compact between September 2008 and 2013, and began the formulation of the second compact on 1 January 2015.[15]
Attractions:
§ Natural Resources: In 1997 a new Minerals Law of Mongolia was passed that set clear guidelines for those in the mining industry. This has resulted in increased attention from foreign investors in recent years. Copper, gold and uranium mines have been the most widespread, but recent discoveries of uranium present another exciting opportunity for future investment. A new Petroleum Law passed in 1991 has also welcomed foreign investment in the oil industry.[16] In May 2015, the Mongolian government has signed an agreement with mining firm Rio Tinto to restart the Oyu Tolgoi Mine.[17]
§ Government Support for Private Enterprise: Since the disintegration of the Soviet Union, Mongolia has been committed to providing a suitable environment for private business. In 2003 private companies accounted for around 75% of GDP. The government has recently decreased corporate income tax in an effort to promote more private investment. Out of 40,000 private companies in Mongolia, around 2,000 are foreign-owned.[18] Additionally, in December 2015, the Mongolian government signed a $4.4 billion finance package to increase investor confidence, a key problem when stimulating Mongolian enterprise.[19]
Troubled Spots:
§ Environment: Mongolia has numerous environmental issues that threaten its future growth and stability. The burning of soft coal in power plants has resulted in severe air pollution. Under the Soviet Union, the use of land for Agriculture as part of the Virgin Lands program resulted in soil erosion from wind and rain. Desertification and overgrazing continue to deplete the country’s amount of land available for grazing and agriculture.[20] Additionally, Mongolia receives 99.8% of its electricity from fossil fuels (2012 est.).[21]
§ Grey Economy: Mongolia shares a border with China, which is a major partner of Mongolia’s “shadow” economy. The World Bank estimates this economy to be at least equal to the official economy, but the actual figures are difficult too calculate, as in the case with any country experiencing a shadow economy. Money laundering is also a growing concern.
§ Unemployment and Poverty: Recent 2016 numbers show that Mongolia has a 10.4% unemployment rate (12.3% Male, 8.4% Female) [22]. Around 21.6% of the population lives below the poverty line, according to 2014 estimates as no new numbers for 2015 or 2016 have been released. It has also been calculated that on average, the consumption of each person in the country is 11% below the national poverty line. Most people in poverty live in rural areas, not in the country’s major cities.[23]
Acknowledgements:
Research and Data Development Provided by: Kamilla Khabibrakhmanova, Natalia Bertuol and Yannick Cools, Research Assistants under the Supervision and Coordination of: Dr. Gerard Janco, President of the Eurasia Center/EBC.
[1] 2016 CIA World Factbook, <https://www.cia.gov/cia/publications/factbook/geos/da.html>
[2] http://www.tradingeconomics.com/mongolia/gdp-growth
[3] CIA World Factbook
[4] CIA World Factbook
[5] http://www.indexmundi.com/mongolia/infant_mortality_rate.html
[6] Ibid.,
[7] Ibid.,
[8]http://www.mn.undp.org/content/mongolia/en/home/countryinfo.html
[9] http://www.focus-economics.com/countries/mongolia
[10] CIA World Factbook, <https://www.cia.gov/cia/publications/factbook/geos/da.html>
[11] http://www.tradingeconomics.com/mongolia/unemployment-rate
[12] 2016 CIA World Factbook, <https://www.cia.gov/cia/publications/factbook/geos/da.html>
[13] State Department: Background Note < http://www.state.gov/r/pa/ei/bgn/2779.htm>
[14] State Department: Background Note < http://www.state.gov/r/pa/ei/bgn/2779.htm>
[15] State Department US-Mongolia Relations <http://www.state.gov/r/pa/ei/bgn/2779.htm.
[16] Guide-Mongolia.com : “Mining and Geology” < http://www.guide-mongolia.com/economy/mining-and-geology/mining-and-geology.html>
[17] 2016 CIA Factbook, <https://www.cia.gov/library/publications/the-world-factbook/geos/mg.html>
[18] Guide-Mongolia.com : “Private Sector” < http://www.guide-mongolia.com/economy/private-sector/private-sector.html>
[19] 2016 CIA Factbook, <https://www.cia.gov/library/publications/the-world-factbook/geos/mg.html>
[20] Ibid.,
[21] Ibid.,
[22] http://www.mn.undp.org/content/mongolia/en/home/countryinfo.html
[23] UN Report on Mongolia: “More than One Third of Mongolians Live in Poverty” < http://www.un-mongolia.mn/index.php?name=News&file=article&sid=309>