Program Data Sheet
438-001

USAID MISSION: Mongolia
PROGRAM TITLE: Economic Growth (Pillar: Economic Growth, Agriculture, and Trade)
STRATEGIC OBJECTIVE AND NUMBER: Accelerate and Broaden Environmentally Sound Private Sector Growth, 438-001
STATUS: Continuing
PLANNED FY 2002 OBLIGATION AND FUNDING SOURCE: $8,000,000 ESF
PROPOSED FY 2003 OBLIGATION AND FUNDING SOURCE: $9,000,000 ESF
INITIAL OBLIGATION: FY1994      ESTIMATED COMPLETION DATE: FY 2004

Summary: USAID’s program to promote private sector led economic growth targets rural Mongolia; emerging private sector business; and economic management at the macro level. Specific activities include—

• training and technical assistance to make herder groups more productive;
• training, technical assistance, and related support to expand access to financial services;
• training, technical assistance, and related support to inform rural Mongolians about the market economy;
• training and technical assistance to develop business associations and make private Mongolian firms more competitive; and
• training and technical assistance to promote privatization, support energy sector reform, and improve economic management.

Inputs, Outputs, and Activities: FY 2002 Program: USAID will use FY 2002 funds to promote private sector growth in four main ways. First, programs focused on rural Mongolia will work directly with herders, private companies, rural financial institutions and the media to expand economic opportunity. The intent is to ensure that rural Mongolia participates directly in the market economy without undermining the country’s fragile environment. Programs include business training workshops that, in FY 2001, resulted in 25 new businesses, more than half of them started by women.

Activities focused on private Mongolian companies and business associations—especially those involved in tourism, meat and cashmere—will introduce new technologies and management approaches. The intent is to make the Mongolian private sector more productive and more competitive in the global economy. USAID ensured Mongolian representation at the February 2001 tourism fair in Chicago, which was a catalyst in increasing the number of American visitors to Mongolia by almost 20%. This year, USAID will help arrange Mongolian representation at similar adventure travel fairs in Spain, Britain, and Italy.

Technical study and training will promote the privatization and commercialization of remaining public owned companies, including in the financial and energy sectors. Programs focused at key government institutions such as the State Property Committee, the Energy Regulatory Authority and the Prime Minister’s Office will encourage improved economic management at the macro level. This support should also promote private sector expansion and help consolidate Mongolia’s transition to a market economy. Since 1998, USAID-funded advisors have been instrumental in the sale of 47 government-owned enterprises through a sealed bid auction that has raised more than $15.4 million in revenue for the state. FY 2002 programs will continue to promote private sector expansion and help consolidate Mongolia’s transition to a market economy.

Planned FY 2003 Program: FY 2003 marks the last year of the currently approved USAID strategy for Mongolia. Activities will continue to focus on economic growth and private sector expansion at both the micro (e.g., rural development and private enterprise support) and the macro (e.g., policy reform and economic management) level. New activities may be integrated into existing programs, with greater attention on training, environmental issues and key government institutions charged with implementing economic reform. An extension of the current strategy or development of a follow-on strategy that maintains targeted support for Mongolia’s economic and political transition is also anticipated, depending on the economic and political environment in Mongolia.

Performance and Results: Important results include more efficient financial markets; an improved business environment; and the transfer of public assets to the private sector. A USAID-funded management contract introduced sound commercial practices and brought about a dramatic turn-around of Mongolia’s Agricultural Bank. Eighteen months of USAID funded management and employee training helped to render the bank solvent and saved its vital network of 356 rural branch offices. The bank now pays $50,000 a month in taxes and is slated for privatization. Second, a new micro credit program established by USAID’s Gobi Initiative has provided more than $1.2 million in loans for herders and owners of small businesses in rural areas who previously had no access to credit. A recently concluded merger with a similar program funded by United Nations Development Programme (UNDP) will result in nearly nation-wide coverage by the end of 2002. USAID’s targeted assistance helped to improve the business environment and make individual private companies more competitive in tourism and other sectors. Finally, privatization met with mixed results, due to recent delays in the planned sale of two large public enterprises. Yet, USAID-funded technical assistance helped shape Mongolia’s new Energy Law, approved by Parliament in May 2001, immediately resulting in the establishment of an independent Energy Regulatory Authority (ERA) to oversee new approaches to energy production and distribution.

Principal Contractors, Grantees, or Agencies: Four major contractors and grantees currently implement the economic growth/private sector expansion portion of the USAID program in Mongolia—Mercy Corps; Nathan Associates; Barents; and Development Alternatives Inc. In addition, several sub-contractors are involved, including Pact, Land O’ Lakes, PA Consultants and J.E. Austin.

US Financing in Thousands of Dollars