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Mongolia
The Development Challenge: Mongolia, a remote and sparsely populated country, provides an important example to other countries in East Asia, Central Asia and elsewhere on how to manage a challenging economic transition within a democratic political framework. It shares long land borders with China to the south and the resource-rich Siberian region of Russia to the north. Mongolia's progress in recent years offers an important beacon of hope for other countries attempting to make a similar transition.
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Please note: All documents are in pdf format |
Politically, Mongolia's transition to democracy is a remarkable achievement with ramifications that go well beyond its frontiers. Nine elections have been held over the past decade, three each at the local, parliamentary and presidential level. Governments have been elected to power in free and fair elections and then peacefully relinquished that power following the outcome of subsequent elections. Upcoming parliamentary elections, scheduled for June 2004, will provide an important test of the extent to which democracy is truly taking root in Mongolia.
Economically, Mongolia's harsh climate, small market and lack of infrastructure present formidable challenges. However, here too the direction and pace of change have been encouraging. Approximately 80% of the Mongolian economy is now in private hands, up from virtually nothing at the beginning of the 1990s. Total GDP is estimated at $1 billion and per capita income is estimated at $450. Mining, tourism, construction and light industry offer significant economic potential. Over the past year, international investor interest in mining increased significantly.
After several years of economic stagnation and decline, economic growth rates approached 4% in 2002 and are expected to exceed 5% in 2003. This encouraging development suggests that Mongolia's hard-won economic stability is beginning to have positive impact. A vibrant "underground" economy and informal remittances from the estimated 70,000 Mongolians working overseas in South Korea, Taiwan, Japan, Germany, the United States and elsewhere perhaps make the actual figures even higher. At the same time, the growing international debt burden--now approaching $1 billion, or the equivalent of the country's annual GDP--is cause for concern.
U.S. interests in Mongolia stem largely from geo-political considerations: its important role in contributing to stability in a potentially volatile part of the world; the positive example it sets in promoting economic reform and democracy; and its visible support for the United States in the continued war on terrorism. Most notably, during the past year a Mongolian peacekeeping contingent consisting of approximately 200 soldiers arrived to assume duties in southern Iraq. At the same time, smaller numbers of Mongolian advisors have helped train members of the new national army in Afghanistan.
A successful Mongolia has important and positive implications for a number of other countries in East and Central Asia, ranging from Vietnam to Afghanistan. Mongolia's strategic location between Russia and China, two traditional rivals that are also nuclear powers and important players on the global stage, adds to its significance. Finally, the links that Mongolia maintains with North and South Korea position Mongolia to make a positive and constructive contribution as a potential "role model" for North Korea when that country eventually emerges from the isolation that it has maintained over the past many decades.
The USAID Program: A new five-year USAID strategy for Mongolia was approved in Washington in May 2003 and took effect on October 1, 2003. This document sets the stage for a tightly focused program that directly addresses two of Mongolia's most pressing concerns: sustainable private sector led economic growth and more effective and accountable governance. Every USAID activity, whether funded bilaterally or through various Washington-managed mechanisms, helps advance at least one of these two objectives.
Judicial reform is the single largest program within USAID/Mongolia's "good governance" portfolio. Following the introduction of new civil and criminal codes in September 2002, USAID assisted in a series of training and outreach programs involving every judge in the country. Simultaneously, USAID/Mongolia improved case management and court administration, introduced new approaches to continuing legal education and helped address corruption in the legal sector. As a result, courtrooms responsible for 80% of Mongolia's caseload now have been fully automated. At the same time, USAID/Mongolia provides political party training as well as assistance to the Mongolian parliament.
Activities aimed at promoting sustainable private sector-led growth operate at a policy level, a company level and a "grassroots" level. As a result of USAID/Mongolia assistance, two of Mongolia's three largest banks--the Trade and Development Bank and the Agricultural Bank--were privatized during FY 2003. Together, the sale of these two banks provided nearly $20 million to the government while holding out the promise of another $40 million in private investment. Significant work is also underway aimed at commercializing and ultimately privatizing Mongolia's energy sector.
USAID/Mongolia's newest program--the Economic Policy Reform and Competitiveness project-- provides training and advisory services to both government institutions and private firms. At the same time, business training provided through the GER Initiative (aimed at rural migrants displaced to urban areas) and Gobi Initiative (aimed at rural Mongolians, especially those living in the Gobi region) help extend knowledge and familiarity about the market economy to a much larger segment of the population.
Other Program Elements: The USAID/Mongolia program is a vital part of the Mission Performance Plan (MPP) developed by the Embassy country team. In addition, several USAID/Washington-funded programs have been launched, all of which contribute to the new USAID country strategy for Mongolia. The growing list of such activities include a grasslands management program in eastern Mongolia; a support grant to XacBank, a pioneering microfinance institution; an energy partnership between the Delaware public utilities commission and its Mongolian counterpart; non-governmental organization (NGO) strengthening related to human rights and rural development; and a variety of information technology (IT) initiatives. Finally, monetization of the U.S. Department of Agriculture wheat program is providing significant additional development resources, especially to NGOs working in rural areas.
Other Donors: The "alphabet soup" of foreign donors working in Mongolia partly reflects the relative success that the country has enjoyed in recent years, especially in terms of its ability to effect both economic and political reforms simultaneously. In recent years, a number of "non traditional" donors have provided assistance to Mongolia. In fact, six of the sixteen bilateral donors represented at the most recent Consultative Group donor meeting in Tokyo on Mongolia included countries in which USAID either has had or still has development assistance programs-Hungary, Russia, South Korea, Turkey, India and Egypt.
Japan is Mongolia's largest bilateral source of both loan and grant assistance. Programs have included a variety of infrastructure and education programs. The United States ranks a distant second in terms of development assistance, followed by a German aid effort of roughly comparable size that includes programs in legal reform, energy, conservation and regional economic development. Many other donors offer limited support to Mongolia, including India (education and IT development), Australia (scholarships), Canada (NGO development), Russia (scholarships), Luxembourg (banker training) and Korea (training for civil servants).
The Asian Development Bank (ADB) is the single largest multilateral donor, followed by the World Bank. Other multilateral donors include the European Union and various United Nations agencies. Finally, NGOs such as World Vision and the Soros Foundation make a variety of useful contributions. In fact, with annual funding levels now approaching $10 million, World Vision has recently emerged as one of the largest providers of foreign assistance to Mongolia.
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