The Economy And Trade Of Mongolia Economics Essay

Posted on

Mongolia is a landlocked state in the Centre of the Asia and it is surrounding with the People ‘s Republic of China and Russian Federation. Mongolia is four times big

as Japan but the population is merely 2,736.800. Mongolian capital is Ulaanbaatar and it is home to approximately 38 % of the population.

The period from 1960-1991 characterized as a communist state and period from 1991 until present is democratic state. Therefore, before 1990 Mongolia was a member of the USSR Council for Mutual Economic Assistance ( COMECON ) and had an economic support from USSR and other communist states spouses. An entree to the COMECON contributed to make high degrees of human development and free entree to the other communist states markets. The COMECON collapsed together with Soviet Union and it caused Mongolia to alter its topographic point in the universe economic system. Mongolia seeks new merchandising spouses in a competitory environment which caused to its accession to the World Trade Organization ( WTO ) . It provided benefits to Mongolia in footings of improved and more unafraid entree to markets.

On the other manus, non exercised new market based economic system contributed to a painful passage procedure market by economic system recession like in rise of unemployment. While the prostration of the fabrication sector was hastened by the death of COMECON, the response served chiefly negative impact in economic system and on human development. In recent old ages the mineral sectors has grown and this has resuscitated some advancement on economic system and human development, but it is the instance when other sectors of the economic system make large springs. Even when mean growing rates look good, they conceal the continuity of poorness which is around “ one tierce of the population lives below the poorness. “ ( One World Net. Web ) . Mongolia can better economic system due to merchandise which will construct up a strong and competitory economic system and my inquiry is to happen out the manner of the profitable development in Mongolia.

Economic Sectors

National Economy

Economic activity in Mongolia is centered on agribusiness and excavation. Mongolia has some of Asia ‘s richest sedimentations of minerals, such as “ Cu, coal, Mo, wolfram, and gold. “ ( CIA, World Fact Book ) Get downing in 1991, Mongolia made a rapid passage from a Soviet-style planned economic system to a market economic system. ( The Academy of Sciences MPR.186 ) The Government made major reforms in the countries of monetary value liberalisation, denationalization, agribusiness, industry, and banking, every bit good as towards making market-based establishments. ( FIFTA. Web ) .

Recently, economic growing increased and the poorness has bit by bit declined. The excavation sector ‘s part to revenues has aggressively increased, due to increasing the monetary value Cu and gold in the universe market. Mongolia farther facilitates opening its economic system and develops a close cooperation with its neighbors and other states in the part. An active engagement in international and regional organisations may go a one of the key to success.

The Main Economic Sectors


Mongolia ‘s agribusiness industry is attractive to international markets. It has alone civilization of mobile life style which is traditional relationship with animate beings and nature.

The agricultural and farm animal sector is still the largest employer in Mongolia. Agricultural merchandises include “ wheat, barley, veggies, eatage harvests, sheep, caprine animals, cowss, camels and Equus caballuss. “ ( CIA, World fact Book ) .

Agriculture employs near the half of the labour force in Mongolia and is the most importance beginning of income in rural countries ( CIA, World fact Book ) . Mongolian agribusiness produces the extremely valued stuffs like cashmere, camel wool, Equus caballus tail, etc. The entire caputs of farm animal, including camels, Equus caballuss, cowss, sheep and caprine animals are now around “ 45 million. “ ( Mongolian Ministry of Food and Agriculture ) However, depending on clime like utmost fluctuation in temperature, long winters making agribusiness points limited. In add-on, rough clime negatively impacting in Herders life.

Mining Sector

Mongolia is rich with minerals, which at present remain undeveloped. Mongolia ‘s extended mineral sedimentations include Cu, coal, Mo, wolfram, and gold. The development of Mongolia ‘s mineral resources over the following decennary is expected to increase the economic system, eliminate unemployment and cut down the poorness. ( Ministry of Mineral Resources and Energy. Web ) . Mongolia is ready to get down the development of strategic and other major mineral sedimentations, such as the Tavan tolgoi coking coal sedimentation, Oyo tolgoi copper-gold sedimentation, Tumurtei Fe ore sedimentation, Tsagaan suvarga Cu sedimentation and Asgat silver-mix metals sedimentation. ( Ministry of Mineral Resources and Energy. web )

Harmonizing to my personal interview with Ms. Togsoo Bekhbat In the past decennaries, Mongolia was non able to develop or work discovered mineral resources because of a deficiency of substructure and capital investing. Since 1973, Mongolia, with fiscal and proficient aid from bilateral and many-sided givers, has set up and operated joint ventures to research and develop major sedimentations of gold, Cu, Mo, U, coal and fluorite. Besides, Mongolia is now going one of the largest manufacturers of several of these metals and minerals. Mongolia produces about 15 per centum of the universe ‘s fluorite and it is a major manufacturer and exporter of Cu, Mo and U.

The Government of Mongolia has late signed an investing understanding with Ivanhoe Mines ( Canadian excavation company ) to develop the Oyu Tolgoi copper-gold mine. Once in full operation, that Oyu Tolgoi copper-gold mine could do Mongolia one of the largest Cu manufacturers in the universe. ( CIA, World Fact Book )

Mongolia ‘s bing and freshly discovered natural resources are its comparative advantage. However, most of locally produced mineral merchandises are being exported in the signifier of natural stuffs. The ultimate end is to cut down the export of minerals in the signifier of natural stuffs and increase the production of higher value added mineral merchandises for both domestic and foreign markets. Above all, Mongolia has wide chances and possible to achieve drastic addition in economic growing trusting on minerals.

Concentrating on Traditional Strength Merchandises

The instance of milk

Mongolian people from the ancient clip respected the farm animal because Mongolian acquiring every necessary merchandises from the farm animal particularly from the cow and sheep. Therefore, farm animal has a particular topographic point in Mongolian civilization. The farm animal genteelness was the lone subdivision of material production in Mongolia in the beginning of the 20th century. Harmonizing to the supply of milk and milk merchandises Mongolia produces adequate milk to run into the domestic demand but late milk and meat merchandises export is declined ( see fig.1 ) .To animate current state of affairs Mongolian authorities must to concentrate on milk and meat merchandises betterment.

Figure 1: Supply of Milk and Milk Merchandises


Population ( 1000s )

Production ( 1000s of dozenss )

Consumption ( 1000s of dozenss )

% of Supply in Consumption

Import ( Thousands of dozenss )






















Beginning: Terbishdagva 2006. ( Ministry of Foreign Affairs. 40 )

Mongolian Ministry of Trade and Foreign Affairs stated that “ milk is traditionally been self sufficient in bring forthing. However, at the beginning of the democracy the province farms were collapsed and the animate beings were distributed to directors and workers. “ ( 39 ) Domestic milk production increased up to 470 million liters yearly in 1990-1999 but in 2001 it decreased by 40 per centum to 290 million liters because of the farm animal have perished nationally from the cold ( 39 ) . The milk production is by and large low, but Mongolian have to last with cold winter and diversifying the merchandise points and better the quality to vie in the universe market.

Over the past decennary, rural poorness has increased disparities between urban and rural populations have widened and some agricultural patterns are no longer environmentally sustainable. Farms in the socialist epoch benefited from free or subsidized inputs and even produced excesss for export but they did so under a soft budget restraint and issues of economic viability so were nowhere every bit of import as now under the market based system.

Trade in agribusiness remains at the head of planetary and regional trade understandings both from an violative position of procuring new export markets and defensive position of guaranting nutrient security and safeguarding the supports of vulnerable people.

A revitalised dairy sector can supply higher incomes and greater employment chances to Herders. Womans are expected to peculiarly profit as they have traditionally been involved in the processing of milk. Demand for dairy merchandises in Northeast Asia is expected to turn quickly with milk tantamount imports of 100 billion kilograms prognosis for 2015. ( Implementation of the Millennium Development Goals in Mongolia.29 ) The market scheme could concentrate more on quality control and stigmatization. In this respect, two types of Mongolian milk saihan airag made of Bulgan ‘s female horse ‘s and camel milk from Omngobi aimag, have been registered as Geographic Indications. ( Daily.4 ) All these steps should ideally organize portion of an export scheme for milk merchandises that emphasis quality high safety criterions and shelf life.

Promoting Mongolian Meat

Mongolia is an eminently pastoral state with a tradition of meat production from Equus caballuss, sheep, caprine animal, cattles, yacks and camels. For the Herders to derive income signifier universe markets there are several necessary hurdlings to traverse.

There is a demand to authorise Herders to run into the demands in export markets with the assistance of modern equipment and engineering.

It will be necessary to heighten the repute of their merchandise.

It would be critical to negociate improved entree to export markets turn toing both duty and non-tariff barriers including those related to the disposal of veterinary and healthful ordinances.

Recently, Mongolian meat export has decreased largely to Russia in 2000 because of disease like Brucellosis and Leucosis. In this respect, Mongolian authorities demands to do “ Index-based Livestock Insurance ” ( Ministry of Foreign Affairs. 48 ) which will procure from above mentioned diseases.

Figure 2: Comparative quality of Mongolian meat


Mongolian meat


New Zealand meat

Russian meat














































Beginning: Mongolian Ministry of Foreign Affairs ( Ministry of Foreign Affairs. 48 )

“ The Russian Federation imports 90 % of Mongolian meat exports, followed by Japan the Republic of Korea and Kazakhstan. Mongolian companies export meat in the signifier of low value added merchandises such as frozen carcases of mammal. ” ( Ministry of Foreign Affairs.48 ) As mentioned meat export is diminishing because Mongolian meat merchandises are non internationally certified, hence, neighbours importing the meat merchandises with a really low monetary value. In other words, there is small market entree for Mongolian exports due to the deficiency of enfranchisement. Therefore, Mongolian can non resuscitate the fabrication sector without first rehabilitating the farm animal sector, peculiarly veterinary and carnal genteelness services natural stuffs, concluding quality and healthful controls.

Bettering the Trading System

Trade Liberalization

Mongolian foreign trade before 1990 was limited merely with communist states. In add-on, Mongolian economic system was a planned therefore, trade is non much developed. After the acceding to the WTO in 1997 Mongolian foreign trade plays an of import function in national economic system. Since submiting to the WTO, Mongolia has well liberalized its trade government. “ At the present Mongolia is merchandising with more than 80 states of which the Russian Federation, the People ‘s Republic of China and the USA are the chief trading spouses. ” ( Ministry of Foreign Affairs. Web ) The new liberalisation government in trade intended to run into the demands of the domestic market increase the fight of domestic industries and challenges in exports. Mongolia ‘s export net incomes are extremely dependent on universe market monetary values of few points like Cu and cashmere. Besides, traditional export points goods such as leather, rugs and wool covers are diminishing.

To do a positive consequence in trade liberalisation, Mongolia needs to research the undermentioned jobs:

To analyse the poverty impact of trade liberalisation

Detailed analysis of victors and also-rans from new trade reform is required to develop the policy to help those adversely affected by policy alteration.

Bettering theodolite transit agreements with adjacent states.

For landlocked Mongolia, an efficient and moderately priced theodolite transit system is a cardinal ingredient of an effectual export publicity scheme.

The authorities of Mongolia is successfully undertaking trade liberalisation. As mentioned, it has joined the WTO which did free entree to the universe market. Besides, Mongolian authorities simplified and reduced the figure of the needed permissions from 600 to 87. ( Ministry of Foreign Affairs. Web ) Presently, more accent demands to be placed on the analysis of impact of free trade on poorness and national industry.

Mongolian favourable status for foreign investing

The trade can merely supply agencies of authorising the poorest category of the Mongolian population if Mongolian exporters can get favourable entree to their major markets for cardinal export merchandises and increasing the foreign investing.

Mongolia offers the undermentioned competitory advantages to foreign investors.

Location: Mongolia boundary lines with Russia and China. In this respect, it is easy to entree the big international markets of these two neighbours and of import planetary participants.

“ Natural resources: Mongolia has rich mineral resources including over 8000 sedimentations of 440 different minerals of which about 600 sedimentations and outcrops have been determined. ” ( Mongolia Today. 52 ) In add-on, carnal beginning natural stuffs particularly universe good known cashmere, wool and leather.

Competitive concern costs: Cheap natural stuffs and low operating costs along with a competitory labour cost.

Stable Political environment: Mongolia is first Asiatic state in the universe with former communist systems who has peacefully adopted a multi-party democratic system. The authorities is best characterized by regard of human rights, freedom and private ownership protection.


As mentioned in the beginning, the prostration of the COMECON had a negative impact on economic system which caused poorness. However, after the democracy Mongolia has quickly embraced free trade and presently has one of the most unfastened economic systems in the universe. The mineral positively lending to the economic system using “ 35 % of the entire industrial sector work force ” ( World Bank. web ) and pulling foreign investors.

On the other manus, Mongolian can non put merely on mineral. Mongolian authorities demands to better the milk and meat merchandises by commanding the nutrient security, quality and must to gain an international enfranchisement to vie in foreign markets. I believe that concentrating on milk and meat merchandises could be a profitable development because Mongolia is rich with farm animal. In other words, it will make employment which will increase the economic growing.