Discover Mongolia : Current issues

Economic stakes

Mongolia is the^4th richest country in natural resources and livestock. Its mining, agri-food and tourism sectors have a strong development potential. Landlocked between the two giants that are China and Russia, Mongolia is now trying to diversify its economic partners through its "third neighbor" strategy, which refers to its willingness to trade with other democratic and developed countries such as France, Japan or the United States. In this way, it is seeking diversification solutions to preserve its economic independence from Russia and China, the latter still remaining its largest trading partner, absorbing 90% of its exports.
In 2017, Mongolia experienced a severe liquidity crisis and was forced to resort to international aid. Faced with falling commodity prices, slowing Chinese growth and an increasing public deficit - which accounted for 90% of the country's GDP in 2016 - the country's risk of default increased. In the wake of this crisis, the Mongolian economy weakened again with the onset of the Covid-19 epidemic in 2019. The restrictive measures have slowed the economy considerably, with GDP falling by 10.7% in the first quarter of 2020.
As of 2021, the IMF has nevertheless announced a rebound in activity, with growth at 5.2%, while public debt is being reduced. The year 2022 should be marked by economic recovery, thanks in particular to government support for the economy, the vaccination policy and the rise in the price of mining raw materials. In the coming years, the challenge should be to achieve a diversification of trade partners and economic sectors.

Agribusiness sector. Although Mongolia's livestock population has increased significantly, reaching 66 million head today, it remains dependent on the country's climatic conditions and the increasingly frequent pest züd

. The agri-food sector is undergoing a complete reorganization. It suffers from under-investment by the government, but the authorities are seeking to raise the price of livestock products, particularly cashmere, to reduce the size of the herds. More and more responsible cooperatives and chains are promoting a sustainable economic system to counter the effects of overgrazing, which is responsible for the desertification of the steppes.

Tourism sector.

In 2019, tourism was one of the pillars of the Mongolian economy. However, it was severely impacted by the health crisis while the country completely closed its borders and imposed severe restrictions from the beginning of 2020. After losses estimated at 15,000 billion tugriks and the endangerment of 1,600 companies and 88,000 jobs, the government decided to reopen the country at the beginning of 2022 and relax entry requirements to revive its tourism sector, which was greatly weakened by the pandemic.

Mining sector.

With more than 6,000 deposits of 80 different metals, Mongolia's subsoil represents a crucial financial manna for the country. The territory has colossal reserves of raw materials, which places the mining sector at the heart of the Mongolian economy but makes it dependent on the price of metals. The Oyu Tolgoi "Turquoise Hill" mine in the Gobi Desert alone accounts for about 30% of Mongolia's GDP. After years of disputes, underground mining began in 2022. The site had been the subject of controversy over profit sharing and environmental impact. It had also crystallized tensions within the Mongolian population, which was worried about the increasing power of foreign companies that were coming to exploit the country's mining resources. The exploitation of this gigantic deposit should contribute to an increase in exports. However, it also poses environmental problems: mining pollutes rivers and has consequences for biodiversity. The distribution of the wealth produced is also a major issue for the country: foreign investment only benefits a minority of Mongolians, while foreign companies are getting massively richer. In 2013, a law was passed limiting foreign investment to 49% in the mining, telecommunications and banking sectors. Today, one third of the population still lives below the poverty line in Mongolia.

Political situation

Since January 13, 1992, Mongolia has established a parliamentary democracy and put an end to the one-party system. The legislative branch of the political system is in the hands of the Parliament, the State Great Hural, which consists of 76 seats elected for four years by direct universal suffrage. Parliamentarians elect the Prime Minister and his government, who hold executive power. The President of the Republic, who is the head of the armed forces and responsible for defence and foreign policy, is elected by direct universal suffrage for a single term of six years.
Since the 1990s, Mongolia has suffered from political instability, with successive governments staying in power for an average of only one and a half years. A constitutional amendment enacted in november 2021 and effective in March 2022 should bring more political stability by strengthening the powers of the prime minister and the independence of the judiciary, but it does not settle the debate on whether to change the regime.
The past few decades have confirmed the bipolarity of the Mongolian political system: the two major parties - the Mongolian People's Party (MPP), founded in 1921, and the Democratic Party - have alternated in power since 1992. The PPM won the last legislative elections in June 2020 and the presidential elections in June 2021, despite a political crisis linked to the management of the health crisis. This forced Prime Minister Ukhnaagiin Khürelsükh, a member of the party, to resign in January 2021. Finally elected President of the Republic a few months later, he will have to deal with issues such as the corruption that affects political life and the distribution of mining rents to reduce inequalities among the population.

Faced with rural exodus and urbanization

For several decades, Mongolia has experienced a rural exodus that empties its steppe and saturates its capital. In 1998, Ulaanbaatar had 650,000 inhabitants. In 2018, its population had almost tripled to 1.49 million. These important displacements of population are caused not only by the economic liberalization of the country, but also by the repeated züds which strike the steppes, accentuated by the global warming. In the winter of 2010, a cold snap hit nearly 90% of the country, bringing with it temperatures that could drop to -50°C and killing 8 million animals. In 2015, 2017 and 2018, other devastating züds decimated entire herds.

Sedentarization. Extreme weather conditions are forcing nomads to abandon their ancestral ways of life. After the loss of most, if not all, of their livestock, thousands of them - 20,000 each year - flock to Ulaanbaatar to look for work. Settled in their sheds

on the outskirts of the city, they participate in the demographic explosion of an under-equipped capital. Faced with an urbanization that is much too fast, Ulaanbaatar is struggling to keep up. For many, the yurt districts have no electricity or running water. In 2012, they account for about 62% of the city's total population. The unemployment rate is close to 60% and brings with it a lot of delinquency, crime, poverty and prostitution. The inhabitants heat with coal, causing significant pollution peaks. Since 2016, Ulaanbaatar has become the most polluted capital in the world, ahead of Beijing!

Urbanization. Major urbanization projects are being developed to fight against pollution, overpopulation and traffic jams. By 2030, the government hopes to have a wastewater treatment plant and new public transport lines in operation, to renovate the yurt district, to diversify heating sources and to improve the insulation of homes. These projects involve international donors and are aimed at improving the living environment of Ulaanbaatar's residents.