In the early 1990s, Mongolia was one of the poorest countries in the world. The per capita income plummeted to $473 in 1989, when it was still under Soviet domination, to about $100 in 1992, when it broke free of Soviet control. Since then the Mongolian economy has made steady — and fairly recently, dramatic — progress. GNP was about $1 billion in the mid 2000s and reached $11.73 billion in 2014. GDP per capita increased from $1,865 in 2002 to $3,910 in 2014. GDP is expected to double again if Mongolia’s mineral reserves are efficiently exploited as it has a relatively small population — less than 3 million people — and lots of copper, gold and coal.

Mining for copper and other resources is a major part of the economy. Minerals and livestock and have traditionally been the backbone of the Mongolian economy. Overflight fees from foreign airlines was the single largest sources of national income in 1990s. Despite a wealth of recently discovered mineral resources, many residents remain desperately poor. Unemployment and high inflation have also fueled anger and resentment. Foreign aid helped Mongolia but also helped it rack up a foreign debt roughly equal to its GDP.

Mongolia's extensive mineral deposits and attendant growth in mining-sector activities have transformed Mongolia's economy, which traditionally has been dependent on herding and agriculture. Mongolia's copper, gold, coal, molybdenum, fluorspar, uranium, tin, and tungsten deposits, among others, have attracted foreign direct investment (FDI).[Source: CIA World Factbook =]

In October 2009, Mongolia passed long-awaited legislation on an investment agreement to develop the Oyu Tolgoi (OT) mine, considered to be among the world's largest untapped copper-gold deposits. However, Mongolia's ongoing dispute with foreign investors developing Oyu Tolgoi has called into question the attractiveness of Mongolia as a destination for foreign investment. This caused a loss of investor confidence, a severe drop in FDI, and a slowing economy, leading to the dismissal of Prime Minister Altankhuyag in November. =

The new government has made restoring investor trust and reviving the economy its top priority, but it will be challenged to unwind the monetary and fiscal stimulus programs in use since 2013 to counteract the fall in foreign investment. In December 2014 the government awarded a deal to develop the massive Tavan Tolgoi (TT) coal field to a consortium comprising Energy Resources/MCS (Mongolia), Shenhua (China), and Sumitomo (Japan); talks continue to hammer out the financing and the operating details. =

The economy grew more than 10 percent per year since 2010, largely on the strength of commodity exports to nearby countries and high government spending domestically, before slowing to 7.8 percent in 2014. Mongolia's economy faces near-term economic risks from the government's loose fiscal and monetary policies, which are contributing to high inflation, and from uncertainties in foreign demand for Mongolian exports. Trade with China represents nearly 62 percent of Mongolia's total external trade - China receives some 90 percent of Mongolia's exports and supplies Mongolia with more than one-third of its imports. Mongolia has relied on Russia for energy supplies, leaving it vulnerable to price increases; in 2014, Mongolia purchased nearly 90 percent of its gasoline and diesel fuel from Russia. A drop in FDI has put pressure on Mongolia's external finances. Remittances from Mongolians working abroad, particularly in South Korea, are significant. =

Economic Statistics for Mongolia

GDP (purchasing power parity): $29.35 billion (2014 est.), $27.23 billion (2013 est.) $24.37 billion (2012 est.), country comparison to the world: 128. GDP (official exchange rate): $11.73 billion(2014 est.). [Source: CIA World Factbook =]

GDP - real growth rate: 7.8 percent (2014 est.), 11.7 percent (2013 est.), 12.4 percent (2012 est.)m country comparison to the world: 6. =

GDP - per capita (PPP): $10,200 (2014 est.), $9,400 (2013 est.)m $8,600 (2012 est.), country comparison to the world: 132. =

A) GDP - composition, by sector of origin: agriculture: 12.2 percent; industry: 35 percent services: 52.8 percent (2014 est.). B) GDP - composition, by end use: household consumption: 54.4 percent; government consumption: 12 percent; investment in fixed capital: 46.1 percent; investment in inventories: 10.3 percent; exports of goods and services: 43.7 percent; imports of goods and services: -66.5 percent. (2013 est.) =

Inflation rate (consumer prices): 11 percent (2014 est.), 11.9 percent (2013 est.). =

Unemployment rate: 7.7 percent (2014 est.); 7.8 percent (2013 est.). =

Gross national saving: 40.2 percent of GDP (2014 est.); 28.6 percent of GDP (2013 est.); 30.4 percent of GDP (2012 est.), country comparison to the world: 10.

Fiscal Year: Calendar year. Currency: tugrik (also spelled tögrög, tughrik All of banknotes have the face of Genghis Khan or Damdin Sukhbaatar. Some have a pictures of the Great Khan’s traveling ger on the back. in 2013, Mongolia issued $1.5 billion of Chinggis bonds, named for the local spelling of Genghis, and the government plans to sell an additional $3.5 billion. [Source: Washington Post]

Mongolian Economy in the 1980s

Major Features: Economy traditionally based on agriculture, livestock breeding, and forestry. In 1980s Soviets assisted in development of extensive mineral resources; mining and processing of coal, copper, molybdenum, tin, tungsten, and gold, accounted for large portion of industrial production. Gross Domestic Product (GDP): In 1985 estimated at US$1.7 billion; per capita income based on GDP was US$880. [Source: Library of Congress, June 1989 *]

Agriculture: Livestock predominates, camels, cattle, goats, horses, and sheep major livestock types. Crops include wheat, barley, oats, hay, potatoes, vegetables. Industry: Processing of forestry, animal, and fishery products, building materials, food and beverage, mining (particularly coal). Resources: Coal, copper, molybdenum, tungsten, phosphates, tin, rare earth, sodium chloride, nickel, zinc, wolfram, fluorite, gold. *

Exports: In 1985 approximately 2 billion tugriks (US$670 million; free on board). Cement, lumber and sawn timber, wool, large and small hides, grain, meat, clothing, minerals. Nearly all trade with communist countries (about 80 percent with Soviet Union); 3.3 percent to noncommunist countries in 1986. *

Imports: Approximately 3.3 billion tugriks (US$1.0 billion, cost, insurance, and freight, 1985). Machine tools, diesel generators, electric motors, transformers, construction equipment, gasoline and diesel fuel, iron and steel, foodstuffs, and consumer durables. Nearly all trade with communist countries (about 80 percent with Soviet Union); 1.7 percent to noncommunist countries in 1986. *

Exchange Rate: 2.985 tugriks= US$1 in March 1989.

Consumer and Business Customs in Mongolia

No land is privately owned. Land has traditionally not belonged to individuals but to tribes and clans of herders. Each tribe or clan had its regular grazing grounds and families were allotted space within this scheme. There were — and still are — almost no fences. With horse people and nomads, wealth has traditionally rested with their animals not in land. The value of land was measured by its ability to provide water and pastures for animals.

In the old days, furs, wools, cashmere, camels hair and meat were bartered for imported products like tea, tobacco flour, sugar and cotton cloth. In the 1990s, the market economy was so new to Mongolia that many sellers at the Ulaanbaatar market didn't have stalls. Instead they sold their goods by walking around with them in their items in their arms, hoping to find a buyer. The markets were jammed even during blizzards.

Foreign businessmen in Mongolia complain of red tape, corruption, lack of transparency, and backwardness. Some regulations are not publicized. The licencing process is often bogged down by overlapping authorities and requirements. Enforcing contracts can be a problem.

On the issue of pirated good, the OSCA reports: Mongolia generally has an excellent record of protecting American trademarks, copyrights, and patents; however, tight resources limit their ability to act. In most cases, when the U.S. Embassy conveys a complaint from a rights holder to the authorities, it quickly investigates the complaint. If it judges that an abuse has occurred, it will (and has), in every case so far, seize the pirated products under administrative powers granted in Mongolian law. Pirated software and media remain problematic due largely to the sheer magnitude of material being distributed. [Source: “Mongolia 2015 Crime and Safety Report,” Overseas Security Advisory Council (OSAC), Bureau of Diplomatic Security, U.S. Department of State]

The number of Mongolians with bank accounts jumped from 5 percent in the late 1990s to 33 percent in the early 2000s. The money was used to provide loans to help the economy grow. As of the mid 2000s, Mongolians had not widely embraced the use of credit cards or checks. Some think they will skip that stage and go directly to cell phone and Internet-based banking.

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, U.S. government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

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© 2008 Jeffrey Hays

Last updated April 2016

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