Over the past 28 years, Mongolia traveled a long and complicated journey upon the path of transformation from a state-planned economy to a market economy. At the present moment, being the most up-and-coming market for both East Asian and Western Pacific regions, Mongolia has been developing dynamically and consistently. In 2011, the Mongolian economy registered a rapid growth of 17.3%, which is one of the highest in the world, compared to China with 9.6% and Russia with 4.3% [World Bank, 2011]. According to the forecast of the World Bank (2020), the economy of Mongolia will grow steadily by an average of 5.6% in the years of 2020-2021. If it had not been the unfavorable impacts of the COVID-19 global pandemic, which negatively affects the economic growth globally, Mongolia would have remained one of the fastest developing countries in the world [Sampath, 2012]. The full potential of the Mongolian economy inspired Ganhuyag Chuluun Hutagt, the former Vice Minister of Finance of Mongolia, to create the phrase “Wolf Economy” to describe the high economic growth of the country. This phrase was afterward popularized by Renaissance Capital, the Russian investment bank, which referred to Mongolia as a new Asian tiger, or a Mongolian wolf.
Historically and traditionally, Mongolia’s economy has been concentrated in agriculture since the country has been heavily dependent on this economic sector, which mainly consists of livestock husbandry and crop production. Having centuries of experience in animal husbandry, the agricultural sector employs more than a quarter of the Mongolian workforce and generates about 10% of the country’s GDP [Trading Economics, 2020; Global Economy, 2020]. Mongolian livestock consists of five primary kinds of animals, or tavan hoshuu mal, that form the basis of Mongolian traditional nomadic life: goats, sheep, cattle, horses, and camels. Having several goat and sheep breeds such as Govi gurvan saikhan and Uulin bor, Mongolia is the second largest cashmere producer worldwide after China with 5,000 tons of cashmere per year [UN Environment, 2019]. Furthermore, since the meat industry of the country has also been an important economic sector, China and Russia are considered the most attractive export markets for Mongolia. As of 2018, China certified 21 meat-producing enterprises of Mongolia to export to China, while Russia – 29 [UN Environment, 2019]. Regarding crop production, the harsh climatic conditions of Mongolia allow farmers to cultivate mostly wheat, barley, and oat in the central parts of the country.
In addition to the vast potential of Mongolia’s agricultural sector, the country has extensive mineral deposits that include over 440 different minerals – 180 gold deposits, five copper and molybdenum deposits, a lead deposit, five tin deposits, 10 steel iron deposits, four silver deposits, 42 deposits of brown and coking coal, 42 fluorspar deposits, 12 salt and 10 sodium sulfate deposits, six semi-precious stone deposits, nine crystal deposits, and over 200 deposits of minerals used in the production of construction materials [Society for Standard Professionals, 2016]. The Oyu Tolgoi gold and copper mine located in the Gobi Desert is one of the largest gold and copper mines in the world, the average planned production of which from 2025 to 2030 will be more than 550,000 tons of copper and over 450,000 ounces of gold per year [Turquoise Hill, 2020]. Another promising deposit is the Tavan Tolgoi, the largest untapped coking and thermal coal deposit that is also located in the southern part of the Gobi Desert. According to Invest Mongolia (2020), its total estimated resource potential amounts to 6.4 billion tons of coal. Overall, being the backbone of the Mongolian economy, the mining industry contributes 23% of GDP, 70% of total export revenues, and has attracted $2.4 billion of investments [Investing News, 2020; Santander Trade, 2020].
In the present circumstances, taking into account resources that nature has endowed Mongolia with and the number of livestock, the government implements strategic infrastructural programs in order to develop the country’s wolf economy along the path of the Asian tigers and become a Mongolian wolf. The two milestones of the development of the Mongolian wolf economy are a five-fold railway expansion and a wide-scale housing regeneration. Since Mongolia is a land-locked country with a territory of 1.5 million square kilometers, the government pays close attention to the development of the existing railway system. Consequently, the government-approved railway expansion plan known as the State Railway Policy will significantly change the economic and industrial landscape of Mongolia. According to this plan, the railways will connect the Oyu Tolgoi and Tavan Tolgoi mineral deposits and link to Russia and China via the Trans-Mongolian Railway [Ulziinorov et al., 2018]. The route will continue to China’s Yellow Sea ports providing Mongolia with access to the whole world.
The second pillar of the infrastructural strategy is the housing regeneration. Almost half of the total Mongolian population of nearly 3.2 million people live in the capital city, Ulaanbaatar, and the rest settle throughout the country in Gers (traditional portable tents or yurts). People, who live in Gers, do not have access to central heating, electricity, and functioning sewage. As stated by the International Bank for Reconstruction and Development (2009), the Parliament of Mongolia elaborated the Regional Development concept for urban and rural development until 2020. According to this program, rural development will resolve the over-centralization of population and industries in Ulaanbaatar and reduce the gap between urban and rural areas. It also aims to enable the rural population of Mongolia to improve housing conditions by improving water supply, providing clean domestic energy, and ensuring sustainable access to basic sanitation and drainage.
Overall, the effective implementation of the strategies outlined by the Mongolian government will allow the country to have a positive economic growth and enter the world market, notwithstanding the negative effects of the ongoing pandemic. With developed agriculture and the mining industry, Mongolia has every reason to become one of the main players in the Eurasian region. Despite being landlocked, the railway expansion plan will allow the country to export its products to countries other than neighboring Russia and China while improving housing conditions will promote more equal and sustainable development of urban and rural areas of Mongolia. Therefore, there is a high probability that Mongolia will indeed become a new Asian tiger.
References:
Global Economy (2020). Mongolia: GDP share of agriculture. Retrieved from https://www.theglobaleconomy.com/Mongolia/share_of_agriculture. Accessed on 14.09.2020.
International Bank for Reconstruction and Development (2009). Southern Mongolia Infrastructure Strategy. Retrieved from http://documents1.worldbank.org/curated/en/163381468323707051/pdf/646000WP0South0B00PUBLIC00Eng0Feb10.pdf. Accessed on 14.09.2020.
Invest Mongolia (2020). Tavan Tolgoi. Retrieved from https://www.invest-mongolia.com/mining/tavan-tolgoi. Accessed on 14.09.2020.
Investing News (2020). Exploration Work Providing Opportunities in Growing Mongolian Economy. Retrieved from https://investingnews.com/innspired/exploration-work-providing-opportunities-in-growing-mongolian-economy/. Accessed on 14.09.2020.
Sampath, Manesha (2012). Mongolia: World’s Fastest Growing Economy. Retrieved from https://globaledge.msu.edu/blog/post/1322/mongolia-worlds-fastest-growing-economy. Accessed on 14.09.2020.
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Society for Standard Professionals (2016). Overview of Mongolia’s Mining Industry. Retrieved from https://sesprofessionals.com/overview-of-mongolias-mining-industry/. Accessed on 14.09.2020.
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Turquoise Hill (2020). Overview: Oyu Tolgoi. Retrieved from https://www.turquoisehill.com/oyu-tolgoi/overview/. Accessed on 14.09.2020.
Ulziinorov, Gansukh, Xu, Ming, and Antsham Ali Syed (2018). Analysis of the Current Situation of Mongolian Railway and Its Future Development. Retrieved from https://www.researchgate.net/publication/324740039_Analysis_of_the_Current_Situation_of_Mongolian_Railway_and_Its_Future_Development. Accessed on 14.09.2020.
UN Environment (2019). Trade and Green Economy in Mongolia. Retrieved from https://www.un-page.org/files/public/trade_and_green_economy_in_mongolia-technical_report.pdf. Accessed on 14.09.2020.
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World Bank (2020). Mongolia: Medium Term Economic Outlook Remains Positive Amid Heightened Uncertainties. Retrieved from https://www.worldbank.org/en/news/press-release/2020/02/14/mongolia-medium-term-economic-outlook-remains-positive-amid-heightened-uncertainties. Accessed on 14.09.2020.
Note: The views expressed in this blog are the author’s own and do not necessarily reflect the Institute’s editorial policy.