Categories
Archive

UNDP In Mongolia: The Guide | 1997 – 1999

Editor: David South

Researcher and Writer: Jill Lawless

Publisher: UNDP Mongolia Communications Office

Published: Between 1997 and 1999

Background: This is the original text from the brochure UNDP in Mongolia: The Guide first published in 1997. It, for the first time, provided a rolling update on what the United Nations was doing in Mongolia, offering key contacts and data to help advance human development in the country. It introduced transparency to the UN’s work in the country and made it easier to hold programme and project staff to account.

Mongolia – Population

With an area of more than 1.5 million square kilometres and a population of 2.38 million as of October 1997, Mongolia has a population density of only 1.5 people per square kilometre, one of the lowest in the world. The country has a relatively low growth rate of 1.6 per cent (1995), down from 2.5 per cent in 1989. At this rate, Mongolia’s population will reach 2.5 million by the year 2000.

Despite the popular image of Mongolians as nomadic herders, it is an increasingly urbanized country – 51.9 per cent of the population is urban, 48.1 per cent rural. More than one quarter of Mongolians live in the capital city, Ulaanbaatar. The other major urban centres are Darhan (pop. 90,000) and Erdenet (pop. 65,000 ).

The country is divided into 21 aimags (provinces), plus the autonomous capital region. The aimags are:

In the centre: Tuv, Uvurhangai, Arhangai

In the north: Bulgan, Selenge, Hovsgul, Zavhan, Darhan-Uul, Orhon

In the east: Hentii, Dornod, Suhbaatar

In the west: Hovd, Uvs, Bayan-Olgii, Gov-Altai

In the south: Dundgov, Dornogov, Omnogov, Bayanhongor, Gobisumber

The People:

About 86 per cent of the country’s population are Kalkh Mongols. Another 7 per cent are Turkic in origin, mostly Kazakhs living in the western aimags of Bayan-Olgii and Hovd. The rest belong to a wide variety of ethnic groups, including the Buryat, Dariganga, Bayad, Zakchin and Uriankhai. Mongolia’s smallest ethnic group is the Tsaatan, about 200 of whom live as reindeer herders in the far north of the country. 

During the communist period, Mongolia was home to tens of thousands of Russians. Few remain. 

More than 4 million Mongols live outside Mongolia, in Russia and the Chinese province of Inner Mongolia.

Human Development:

– Mongolia’s per capita GDP is U.S. $359 (1995). But this fails to take into account the cashless subsistence and barter economy widespread in rural areas.

– Poverty, though widespread, is difficult to tabulate. 1996 government figures put the poverty rate at 19.2 per cent – 19.8 per cent for rural areas, 18.7 for urban areas. But State Statistical Office figures for October 1997 indicate 36.8 per cent of urban residents and 27.5 per cent of rural Mongolians live below the poverty line. 

– Omnogov, Gobisumber, Hovsgol, Ovorhangai and Bayanhongor are the aimags with the highest poverty rates.

– The average monthly household income in September 1997 was 58,516.7 tugrugs (U.S. $73). Average expenditure was 58,124.8 tugrugs. In 1995, 48 per cent of household expenditure went on food. In poor households, the figure was 64 per cent.

Social Data:

Life expectancy: 63.8 years (1995)

Infant mortality rate: 40 per 1000 

Under five mortality rate: 56.4 per 1000 

Maternal mortality rate: 185.2 per 100,000 (1995)

One-year-old immunization rate: tuberculosis 94.4 per cent, measles 85.2 per cent (1995)

Access to safe drinking water: rural 89.9 per cent, urban 46.1 per cent (1995)

Access to sanitation: 74 per cent (1995)

Adult literacy rate:

 men 97.5 per cent,

 women 96.3 per cent 

Primary school net enrollment: 93.4 per cent

Secondary school net enrollment: 56.9 per cent 

Physicians: 26 per 10,000

Hospital beds: 9.9 per 1000

Daily calorie intake: 2278.2

Data 1996 unless otherwise indicated. Sources: State Statistical Office, Human Development Report Mongolia 1997

Mongolia – Economy

An Economy in Transition:

After 70 years of centrally planned economy, Mongolia is embracing free-market principles with a vengeance. Economic liberalization began under the Mongolian People’s Revolutionary Party government in the early 1990s. The Democratic Coalition government, elected in June 1996, has vowed sweeping economic changes, including  privatization of state assets, liberalization of trade and promotion of foreign investment.

The foreign investment law now encourages foreign investment in the form of share purchases, joint ventures and wholly foreign-owned concerns. Mining companies are given significant tax holidays. In May, 1997 parliament abolished customs duties expect on alcohol, tobacco and oil products.

All of this has been a shock to Mongolia and Mongolians. The country’s GDP shrank by a third in the early 1990s, though it has slowly recovered since. Inflation topped 300 per cent in 1993, but was brought down to below 50 per cent by 1997. The tugrug fell from 40 to U.S. $1 in 1991 to 800 to the dollar in 1997. Unemployment officially stands at 6.5 per cent – unofficial estimates are much higher.

The government’s ambitious privatization scheme has stalled; manufacturing and exports are down; imports are up. Adding to the problems is the fact that world prices for Mongolia’s major export items – copper and cashmere – have fallen.

The state retains at least 50 per cent ownership of the nation’s flagship enterprises, including the national airline, MIAT, the Gobi cashmere company and the power stations.

Mongolia has a resource-based economy, exporting mostly raw materials and importing mostly processed goods. The top exports are mineral products, textiles, base minerals, hides, skins and furs and animals and animal products. The major imports include petroleum products, industrial equipment and consumer goods.

Mongolia’s major trading partners are its two neighbours, China and Russia, though Korea and Japan are becoming more important – and the number-one export destination is Switzerland. 

Sidebar: The rural economy

Half of Mongolia’s population is rural, and herding remains the backbone of the Mongolian economy. Agriculture accounts for 30 per cent of the nation’s GDP. The number of herding households grew during the economic turmoil of the early 1990s, and now stands at more than 170,000; there are 30 million head of livestock in Mongolia. Herders produce meat, skins and furs; more and more herders are investing in cashmere goats, a substantial money-earner. 

Cultivation of crops, on the other hand, is limited. Before 1990, Mongolia was self-sufficient in cereals and even exported to the Soviet Union. But the sector suffered badly in the early 1990s. The 1997 harvest was 239,000 tonnes, 56 per cent of 1991-95 levels and only 40 per cent of pre-1990 harvests. Mongolia must now import 40 per cent of its cereal needs, a factor that contributes to a vulnerable food-security situation. Cultivation of vegetables is up, but remains minor – only 31,000 tonnes in 1997.

Sidebar: Rich in resources

Mongolia is resource-rich. This vast territory contains 15 per cent of the world’s supply of fluorspar and significant deposits of copper, molybdenum, iron, phosphates, tin, nickel, zinc, tungsten and gold, as well as at least 100 billion tonnes of coal.

Copper is the nation’s number one export. 

Minerals account for more than a third of Mongolia’s GDP and earn half of its hard currency. Gold production is increasing.

Mongolia also contains significant reserves of oil, which could transform the economy. But infrastructure and transportation limitations mean that commercial extraction is limited. The completion of a pipeline to China could change all this.

Economic Data:

Exchange rate: $1 = Tg 808 (Nov 1997)

GDP: Tg 185.5 billion (1996)

GDP per capita: Tg 228,605 (1996)

Inflation: 325 per cent (1992), 53 per cent (1996)

State budget expenditure: Tg 203.6 billion (Jan-Oct 1997)

State budget revenue: Tg 176 billion (Jan-Oct 1997)

Foreign aid (1991-97): U.S. 478 million

Official external debt: Tg 522 billion (Oct 97)

Industrial output: Tg 270.6 billion (Jan-Oct 97)

Exports: $334.2 million (Jan-Oct 97)

Imports: $343.3 million (Jan-Oct 97)

Workforce: employed: 791,800, unemployed 65,700 (Oct 97)

Source: State Statistical Office 

Mongolia – Politics

Seven decades of communist rule in Mongolia began to crumble in 1990, when the collapse of the old Eastern Bloc brought the first pro-democracy demonstrations. The ruling Mongolian People’s Revolutionary Party, which had already initiated a Mongolian version of glasnost, permitted the nation’s first multiparty elections in July, 1990. 

Superior organization helped the MPRP win both the 1990 and 1992 elections (taking 71 of 76 parliamentary seats in the latter), but reform picked up speed. In 1992, the country adopted a new Constitution that enshrined human rights, private ownership and a state structure based on separation of power between legislative and judicial branches.

In the June 1996 election, major opposition groups united to form the Democratic Coalition, made up of the National Democratic Party, the Social Democratic Party, the Believers’ Party and the Green Party. Somewhat to its own surprise, the Coalition won a healthy 50 of 76 seats in the State Ikh Hural, or parliament. The composition of the Hural is now: National Democrats 35, Social Democrats 15, MPRP 25, Mongolian Traditional United Party 1.

In addition to their economic reforms, the Democrats have carried out radical restructuring of government, slashing the number of Ministries from 14 to 9.

The government has a healthy majority, but tensions sometimes emerge between the coalition partners. Mongolia’s transition to democracy has been remarkably peaceful, and the young democracy is robust – there are now more than 20 political parties in the country. 

But economic hardship has caused resentments. In the 1997 Presidential election, voters elected N. Bagabandi, the candidate of the MPRP. In the fall of 1997, the government had to face demonstrations from students and pensioners and an opposition campaign that led to a confidence vote in parliament — a vote the government easily survived. 

Political structure:

Mongolia has a parliamentary system of government, with a 76-seat legislature called the State Ikh Hural. The President, directly elected for a four-year term, is second in authority to the legislature, but he appoints judges and has the power of veto (which can be overturned by a 2/3 vote in parliament).

Chronology:

1911 collapse of Manchu Qing Dynasty; Mongolia declares its independence

1919 China invades Mongolia

1921 with Soviet help, Mongolia gains final independence from China

1924 Mongolian People’s Republic declared

1990 pro-democracy protests; Constitution amended; first multiparty elections

1992 second multiparty elections; new Constitution adopted

1996 Democratic Coalition elected as Mongolia’s first non-communist government, headed by Prime Minister Enkhsaikhan

1997 N. Bagabandi from the MPRP elected President

Voter turnout: 

1996 elections: 92.2 per cent

1996 local Hural: 64.0 per cent

1997 presidential: 85.1 per cent

Mongolia – Society and Culture

Mongolia has a unique and durable traditional culture, centred around the herding lifestyle. Herders remain semi-nomadic, moving their animals with the seasons as they have for centuries

Many urban Mongolians retain strong links to the land, both literal and sentimental, and the country’s performing and visual arts often celebrate the landscape and the animals — especially horses — that are central to Mongolian life. Mongolia has several distinctive musical instruments and styles, including the morin khuur (horsehead fiddle), the long song (urtyn duu) and the throat-singing style known as khoomi.

After seven decades of communism, Mongolians are once again celebrating their traditional culture, and embracing the image and legacy of the most famous Mongolian of all time – Chinggis Khan, who in the 13th century initiated the Mongol Empire, the greatest land empire the world has ever known. He gives his name to everything from a brand of vodka to a luxury hotel, and centres for academic Chinggis research have been set up.

In sports, Mongolians favour the “three manly sports” — wrestling, archery and horse racing — that form the core of the annual festival known as Naadam. Mongolian wrestlers have won a number of medals at international competitions and are even entering the field of Japanese Sumo.

The 1990s have seen a flowering of freedom of expression. Mongolia has an extraordinary 525 newspapers and a wide range of magazines, while the first private radio and television stations have been established. 

Religion:

Mongolians have been Buddhists since the 16th century, when the Mongolian king, Altan Khan, was converted by Tibetan lamas. In the pre-revolutionary period, Mongolia was ruled by a series of Living Buddhas, or Jebtzun Damba. The eighth, and last, Jebtzun Damba was removed after the communist takeover.

Traditionally, monasteries were centres both of learning and of power. It’s estimated Mongolia had 100,000 monks, or lamas, in 1921 — one third of the male population. In the 1930s, this power became the focus of a ruthless series of purges that reached a climax in 1937. Most of the country’s monasteries were destroyed, and as many as 17,000 monks were killed.

Today, Mongolia is once again embracing its Buddhist heritage. Monasteries are being restored, and are once again crowded with worshippers. The Dalai Lama is an enormously popular figure and has visited the country several times.

For many Mongolians, Buddhism is flavoured with traces of Shamanism, an even more ancient spirituality.

Mongolia also has a significant Muslim community — about 6 per cent of the population. These are mostly ethnic Kazakhs living in the far west of the country. The opening-up of the country has led to an influx of Christian missionaries, and this remains a source of some tension and debate.

A Young Country:

Mongolia is a remarkably young country — more than 60 per cent of the population is below the age of 30, and 40 per cent of Mongolians are younger than 16. This young generation, with its embrace of Western styles and ideas, is changing the complexion of the country. Western pop music and North American sports like basketball have a huge following among Mongolia’s youth. So, too, do homegrown artists like the pop groups Nikiton and Spike and the singer Saraa. 

Social Data:

Television sets: 6.2 per 100 (1995)

Newspapers: 2 per 100 (1995)

Number of telephones: 82,800

Marriage: 10.9 per 1000 over 18

Divorce: 0.7 per 1000 over 18

Number of pensioners: 287,200

Crimes reported: 20,454 (Jan-Oct 97)

As percentage of same period in 1996: 114.4 per cent

Data 1996 unless indicated. Sources: State Statistical Office, Human Development Report Mongolia 1997

More from Jill Lawless:

Read a story by Jill in The Guardian (9 June 1999): Letter from Mongolia | Herding instinct 

Read a World Health Organization (WHO) report on substance abuse and alcohol consumption (WHO Global Status Report on Alcohol 2004) citing Jill here: https://www.who.int/substance_abuse/publications/en/mongolia.pdf?ua=1 

Further Reading:

Modern Mongolia: From Khans to Commissars to Capitalists

The Mongolian Economy: A Manual of Applied Economics for a Country in Transition

The transition to a market economy: Mongolia 1990-1998

Wild East: Travels in the New Mongolia

This work is licensed under a Creative Commons Attribution 4.0 International License.

ORCID iD: https://orcid.org/0000-0001-5311-1052.

© David South Consulting 2018  

Categories
Archive

Gobi Desert Wine to Tackle Poverty and Boost Incomes

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

In the arid Gobi Desert spanning the two Asian nations of China and Mongolia is a bold attempt to make wine and reduce poverty. The environment is harsh, with temperatures swinging from sub-zero winter cold to sweltering summer heat. The desert is also home to high winds and notorious dust storms that plague China’s capital Beijing every year.

China’s wine industry is booming as people have embraced the drink’s perceived health-giving qualities and are using it to celebrate new-found wealth as the economy has flourished. Current wine consumption in China is half a litre per person per year, low compared to the French average of 55 litres a year. But this is growing quickly.

Well-known brands include Great Wall, Dynasty and Changyu (http://www.changyu.com.cn/english/index.html), which is considered the world’s 10th largest wine producer.

One innovative winery is using this wine boom to tackle poverty and increase local wealth.

Chateau Hansen (hansenwine.com) in Inner Mongolia has been operating since the 1980s, but recent expansion and modernization have significantly increased its earning power and the number of people it employs. Located in an area with high levels of poverty, it has developed a successful wine business in the desert by tapping the plentiful water supplies from the Yellow River. The area is now considered one of the best for growing wine grapes in China.

Located near Wuhai city (http://en.wikipedia.org/wiki/Wuhai), 670 kilometres west of Beijing, Chateau Hansen has 250 hectares of Merlot, Cabernet Sauvignon and Cabernet Gernischt grapevines.

The vines are buried under the sand to protect them from the harsh weather in the winter.

“The lowest temperature gets down to is below -20 degrees C (Celsius), but in summer, it can reach 38 or 40 degrees C (102 or 104 F),” Li Aixin, Chateau Hansen’s head of viticulture, told MSNBC. “Here the four seasons are good for the growth of the grapes, but in the winter we need to bury them in the earth” to keep them from freezing. Hansen has been ambitious in its approach. It has a European-style chateau, hotel and even a French wine expert, Bruno Paumard, on site to help with the wine making. The chateau’s cellar now stores 1,000 barrels of wine.

Paumard arrived in China in 2005. He has thrown himself into Chinese culture and tasted and tested the country’s wines. Hansen has produced 400,000 bottles of wine, mostly sold in China, where red wine drinking has become a big part of the culture of celebration.

Hansen sells the majority of its wine to government organizations and regional enterprises. It has seen its profits double to 100 million yuan (US $18 million) in 2011 and hopes sales will double again in 2012.

“Eighty per cent of the market in China is really the local governments who encourage the enterprises in their cities to consume red wine, of a certain brand, at their banquets in the place of Chinese ‘baijiu’ for their incessant and never-ending toasts,” said Paumard, referring to China’s home-grown rice wine. “So it’s actually a market that’s totally unique.”

Hansen’s Cotes du Fleuve Jaune du Desert de Gobi has become one of the biggest award-winning wines in China. It received a bronze medal from the International Wine Challenge of Blaye, near Bordeaux, France.

China now stands as the world’s fifth-largest consumer of wine (International Wine and Spirit Research study) (http://www.iwsr.co.uk/). The market in China is forecast to grow by 54 per cent from 2011 to 2015, adding up to a billion bottles.

A map of China’s vineyards and their terroir or soil conditions shows a diverse wine-making sector (http://www.hansenwine.com/english/vineyardlink.html).

In this busy marketplace, Hansen prides itself on being organic. It also has the goal of turning the arid desert into green vineyards using irrigation from the Yellow River and groundwater. It wants to create employment and raise living standards in the region and is fitting into a national strategy to raise living standards for poor regions.

There is a training programme for the around 400 workers employed by the winery. No pesticides are used and only sheep dung is used as a fertilizer provided by 3,000 sheep on site. Trees also play a role in providing humus (http://en.wikipedia.org/wiki/Humus) for the vines. There is also accommodation in a nearby village for the employees.

There are 250 hectares of vineyards and the grapes are harvested by hand. Expansion began in 2001 when the chateau and winery were built. It is strategically located just 500 metres from an airport and the chateau has a luxury hotel. Around 20,000 people visit a year, according to Hansen’s website, bringing in further income for the winery. The winery also uses Mongolian culture and cuisine as a selling point to attract tourists.

The chief executive of Hansen is Han Jianping, who made his first fortune in real estate development.

Han believes that “the momentum of growth in the wine industry is huge.”

“With a great foundation of more than 1 billion people as we have in China, and (the industry) growing at 20 or 30 per cent a year, there is a huge potential for more growth,” he said.

Resources

1) China Wine Online: An information service that also produces the China Wine Business magazine and runs the China Wine Study Tour. Website: http://www.winechina.com/en/index.asp

2) The 10th Shanghai International Wine and Spirits Expo 2013: Website: http://www.winefair.com.cn/sugar/en/index.asp

Creative Commons License

This work is licensed under a
Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

We accept payments and donations. We use any funds received to keep content online, or to create new content. Thank you! https://www.paypal.me/davidsouthconsulting.

Scan code with your phone and help us out.

More on the Gobi Desert here:

Development Profile: UNDP In The Southern Gobi Desert | May-June 1998

Kommunikation total: Der siebte Kontinent

Wild East 17 Years Later | 2000 – 2017

ORCID iD: https://orcid.org/0000-0001-5311-1052.

© David South Consulting 2021

Categories
Archive Blogroll

A Steppe Back?: Economic Liberalisation And Poverty Reduction In Mongolia

Paper delivered to the School of Politics and Government, Birkbeck College, University of London, London, UK, 2000

“… the neo-liberal claim that transition is most successful in situations where state organs wither away is highly problematic. The state, it seems, is required as a fundamental regulatory formation in transition (Pickles and Smith 1998: 15).”

By David South

This paper will explore the profound weaknesses of economic liberalisation as a tool of poverty reduction in the developing world. I have chosen to explore the experience of the Northeast Asian nation of Mongolia; a country sandwiched between Russia and China which has been held up as an example of how economic liberalisation policies and strong personal freedoms can help a country make the transition from a command-based Communist country to free markets and democracy (UNDP Mongolia: The Guide 1997-1999). I argue that the slate of policies that constitute economic liberalisation (or “shock therapy”) in the 1990s – privatisation, price liberalisation and a free-floating currency – are, by themselves, poor mechanisms for the alleviation of poverty; that in fact they increase poverty rates and leave a legacy of weak institutions that are either unwilling to or incabable of helping the poor. The author will also draw on firsthand evidence gained while working in the United Nations mission in Mongolia for two years.

Economic liberalisation policies have been inhibited from alleviating poverty by the cultural legacy of Mongolia’s economic development, which has de-emphasised private property and a money-based economy and placed a high emphasis on wealth being held in herds of animals and goods exchanged by barter.

Mongolia, with its relative isolation and small population of 2.4 million (Human Development Report Mongolia 2000: 55), has been seen as a self-contained petri dish by economic liberalisers hoping to incubate a robust transition to free markets and democracy that can serve as an example to other post-Communist states.

Mongolia’s journey towards neo-liberal ideas is unique. Unlike many other developing nations, Mongolia’s lively democratic movement that emerged at the end of the 1980s actively sought out these policies, and has enjoyed strong and widespread public support for them (though this has ebbed and flowed with the economic fortunes of the country). The 1996 election was fought and won by the Democratic Coalition based on these policies; the Coalition won 50 of the 76 seats in Mongolia’s parliament, and voter turnout was more than 90 per cent (Far Eastern Economic Review 1997: March 27). Thus, this is not a case of international institutions forcing upon a country policies against its wishes: the door was opened and the economic liberalisers were effectively invited in for a big bowl of fermented mare’s milk.

However, it is also a country in which economic liberalisation has failed to deliver anticipated reductions in poverty for the majority of the population, and a strong case exists that it has made things worse.

As the Human Development Report Mongolia 2000 states:

In recent years however, the predominant vision has been neo-liberal. Backed by some international donors, reformers have argued that the best thing the state can do is to largely withdraw from the economy – by rapidly privatising state enterprises, and dismantling as many regulations and controls as possible, and allowing market forces to determine the production and allocation of goods and services. (Human Development Report Mongolia 2000: 13)

Liberalisation policies in Mongolia: A potted history

With the fall of the Soviet Union at the beginning of the 1990s, Mongolia woke up to find itself without its financial benefactor for most of the 20th century, Russia, and in the grip of a severe economic decline (Rossabi 2000: 9).

But a new “big brother” was at hand. In 1991, economic liberaliser Jeffrey Sachs arrived in Mongolia (Fortune 1998: December 7). The arrival of Sachs and his ideas were to have a profound impact on the lives of Mongolians. He gathered a group of well-educated Mongolian economists to test economic liberalisation theories.

Smith and Swain neatly summerise the source of economic ideas for the transition states:

The roles played by Francis Fukuyama (1992), formerly of the US State Department, and Jeffrey Sachs (1990), as policy adviser … translated this agenda into the all too familiar programme of so-called ‘shock therapy’. Shock therapy has been based on the view that capitalism could be … imposed by fiat and that the unleashing of the power of capital will inevitably allow the institutions, regulations, habits and practices associated with the ‘normal’ functioning of a capitalist market economy to emerge (Smith and Swain 1998)

The economic liberalisation project in Mongolia can be split into two distinct phases. The first more tentative phase under the Communist government extended from 1990 to 1992 and included privatisation of some state firms, the issuing of stock-market vouchers to most of the population and a failed attempt to enter the foreign currency markets (as a result of which 80 per cent of the country’s reserves were lost). This phase coincided with a new constitution, democratic elections and significant improvements in personal freedoms.

The economic liberalisation project encountered serious difficulties from the start, and when all aid and subsidies from the Soviet Union were removed, the economy collapsed, with inflation spiralling to 320 per cent (Human Development Report Mongolia 2000: 13). Pro-economic liberalisation factions in the Communist government lost influence and the reforms stalled from 1992 until 1996, when they were re-started with a vengeance with the election of the Democratic Coalition. The Coalition was assembled from a hitherto fragmented opposition by the Washington-based International Republican Institute and mimicked the policies of the American Republican Party, including distributing a Newt Gingrich-style “Contract with the Mongolian Voter.”

The second phase of reforms, under Democratic Coalition Prime Minister M. Enkhsaikhan, was launched with the removal of price controls on fuel and electricity, increasing prices by 50 per cent (Rossabi 2000: 11). This phase of economic liberalisation also ran into difficulties, but its most successful policy achievements have been the privatisation of public housing, the removal of trade tariffs and the reining in of inflation.

Poverty and economic liberalisation

Prior to the introduction of economic liberalisation, there was no extreme poverty in Mongolia, though it is difficult to gauge relative poverty since this information was not gathered. Rossabi notes, however, an extensive public welfare system was spread throughout the country:

The Mongol economy required substantial subsidies from the Soviet Union. This command economy produced inefficient industries, few consumer goods, and scant increases in the size of the Mongol herds. The one-party system limited dissent and contributed to human rights abuses. On the other hand, the government provided extensive medical, educational, and welfare benefits to the young, women, the elderly, and indeed much of society. A growth in population, a longer life span, and high rate of literacy were byproducts of such state policies. (Rossabi 2000: 6)

All research data has shown an increase in poverty levels for a large portion of the population after 1990. Estimates vary wildly, but the United Nations Development Programme reports that 38.4 per cent of urban dwellers – and 32.6 per cent of rural residents – were poor in 1998 (Human Development Report Mongolia 2000: 23). School attendance is down, regional disparities have become more extreme, with the capital experiencing a boom fuelled by international aid (this totalled US $180 million in 1998 (Mongolia Update 1999: 27) and an expanding service sector. Provincial towns and smaller communities have seen local state-run businesses collapse, communications weaken, and a leaching of the population, either to the countryside to herd animals or to the capital to seek work.

To cite one graphic anecdotal example of the process, a consulant for the Asian Development Bank told a 1998 donor agencies meeting of the irony of going into former factory towns, and telling the well-educated residents to turn to small crafts and itinerant vegetable growing rather than restarting the existing factory.

Mongolia’s transition: theoretical dilemmas

As Pickles and Smith note in their work of political economy Theorising Transition: the Political Economy of Post-Communist Transformations, it is a profound mistake to ignore the distinctive evolution of each of the former Communist states. Mongolia’s attempts at transition to a market economy have been deeply marked by its cultural legacy, in spite of attempts to transcend this. While Ohmae may assert that “This movement up the ladder of development has nothing to do with culture and everything to do with the region’s ability to put the right policies, institutions, and infrastructure in place at the right time (Ohmae 1994: 21),” culture is crucial. It is simplistic to depend on a “stock set of policies to enable the supposed transition to capitalism at the end of the twentieth century to be achieved (Pickles and Smith 1998: 10).”

As Pickles and Smith add about post-Communist Eastern Europe:

Treating post-communist Eastern Europe as a whole fails to recognise the ever-present diversity of some 27 states and 270 million people. Even at the end of the nineteenth century, such political-economic diversity was central to what was unfolding in the region … The diversity of historical experiences was replicated under state socialism, and while we would not argue for some form of historical determination, the state socialist economy in part relied upon these spatial divisions of labour and forms of social organization and institutionalised practices, albeit that large-scale attempts at forced industrialisation were made to eradicate the legacies of ‘peasant societies’ and uneven capitalist development. (Pickles and Smith 1998: 12)

Historically, Mongolia had never experienced capitalism, even in its most basic and embryonic form. Prior to the 1921 revolution which made Mongolia the world’s second Communist country, the vast majority of its citizens were divided between two occupations: nomadic herding, and the herding of souls as Buddhist monks. There was a small trading community, including a tiny community of Jewish traders – a legacy of the long-gone silk route that once plied its way through the Mongol Empire. But modern, urban, industrial capitalism as was present at this time in Europe was nonexistent in Mongolia. Concepts of capitalism, market economics and private property were introduced anew after 1990.

Urbanisation, modernisation and industrialisation were wholly communist concepts in Mongolia prior to 1990. The traditional nomadic way of life measures wealth in terms of the size of the herd and places a high value on the ability to roam unencumbered by private property divisions and the ability to trade animals for other goods (though these needs are simple since a nomadic herder can only carry around a limited quantity of possessions).

Economic liberalisation policies have, ironically, only exacerbated this trend, driving more of the economy into barter relations and actually pushing a portion of the population out of urban areas and into subsistance herding in order to survive (Partnership for Progress 1998: 2-3).

Mongolia also offers some anomalies to theories of economic and democratic liberalisation. Lewis contends that democracy gives a nation a distinct economic advantage. “Average wealth, the degree of industrialisation and urbanisation and level of education are perceived to be much higher for countries which are democratic, education being of particular importance in this respect (Lewis: 1997).”

Yet as Fortune magazine noted, “No other Asian country enjoys more political freedom today than Mongolia. And no other Asian country has shown greater commitment to open markets. But Mongolia has received little reward for its efforts (Fortune 1998: December 7).”

The role of the state

Broad, Cavanagh and Bello see a strong argument for clear state direction in underdeveloped economies in the beginning stages, before allowing market mechanisms to dominate:

The South Korean economy’s resumption of growth after a brief period of stagnation at the onset of the 1980s and Eastern Europe’s slowdown after rapid growth in the 1960s confirm a more complex truth than the purveyed by free-market ideologues. Communist economies may propel societies through the first stages of development, but further growth into a more sophisticated economy necessitates a greater role for market mechanisms. (Broad/Bello/Cavanagh 2000: 392)

Strong state direction in economic development has been abandoned in Mongolia (it remains to be seen whether the re-election of the former Communist party in the summer of 2000 will alter this), and it can be argued that the over-dependence on market mechanisms has been premature.

In fact, “the neo-liberal claim that transition is most successful in situations where state organs wither away is highly problematic. The state, it seems, is required as a fundamental regulatory formation in transition (Pickles and Smith 1998: 15).”

The absence of this regulation in Mongolia means that where once economic transactions were transparent, they have now gone underground. The example of cashmere exports (one of the country’s major foreign-currency earners) is particularly interesting. In 1998 the Mongolian government, faced with ever-dwindling tax revenues, introduced a tax on cashmere exports, ostensibly to protect the domestic cashmere-manufacturing industry. Whatever the true intention, the result was catastrophic for government revenues. Recorded exports fell by more than 98 per cent, to US $306,000 in 1998 from US $16 million in 1997 (Far Eastern Economic Review: 1999). The trade went underground and a handful of customs officials could not make a dent in a border as vast as Mongolia’s. It is a graphic example of how weak the central government had become, unable to raise revenues when necessary.

Economic liberalisation also tends to pull economic activity into the capital, as has been witnessed across the transition states. Centrifugal forces leave great swathes of poverty in rural areas and drain marginal urban centres of their skilled workers (Pickles and Smith 1998: 17). Mongolia is no exception to this pattern (Rossabi 2000: 10).

Forces outside the market

After investigating the role economic liberalisers in non-communist developing nations, Robert Bates found that market-oriented economists routinely overlook the role politics and political power plays in wealth distribution:

One reason that market-oriented economists tend to deny the centrality of politics to the development process is that they tend to discount problems of distribution. Those who adhere to the efficiency-and-growth position counter that if development produces a maldistribution of income, those who are losers in the short run could become winners in the longer run … From this viewpoint, governments are not just irrelevant to the development process, the actually impede it. (Bates 1988: 239-240)

There is scant contemporary research into the role of clan or family elites in modern Mongolia, but Rossabi, a Mongolia historian, believes they wield significant influence to this day, and have glided from communism to capitalism with ease (Rossabi 2000: 12). He asks, “Has there been sufficient turnover in the political elite, or does it represent the same consitutency as in the past? Has it expanded sufficiently to make itself more broadly representative of the Mongol population, including the herders and the countryside in general?”

In search of a purpose

Mongolia today is undergoing a basic economic dilemma familiar to Ricardo. It is at once transforming political and economic relations while also exploring what advantages it has to offer to the world markets, that old chestnut of absolute and comparative advantage. To date, its absolute advantage has been to be the source of raw materials, the two key foreign currency earners being copper and cashmere wool (Human Development Report Mongolia 2000: 30).

Its large herds of animals (some 34 million) are under-utilised as foreign-currency earners, and for the most part provide food for domestic consumption. One of the main reasons for this has been the rudimentary livestock techniques that exclude these vast meat and dairy resources from foreign markets (while the herds are raised without any use of chemicals, there is no quality control – a service once provided by the state before 1990). The distortions to the economy caused by these policies are highlighted in the Gross Domestic Product (GDP). In 1985, agriculture accounted for 14.3 per cent of GDP, and industry was 31.8 per cent. By 1998, agriculture (now mostly nomadic herding) accounted for 32.8 per cent of GDP and industry shrank to 24.1 per cent (Human Development Report Mongolia 2000: 56). The economy had contracted and was more focused on meeting basic domestic food needs.

Mongolia has a number of strengths it can draw on, however, with its impressive steps at building democracy and personal freedom chief among them. Lewis categorises former communist states into two groups, with group two taking an undemocratic route. Mongolia would rank in group one, since these countries have: “relatively rapidly established a reasonably viable constitutional order and multiparty system, having held free elections, seen unequivocal changes of government and generally established civil liberties (Lewis: 1997).”

The economic model used by the Democratic Coalition was the United States; Mongolia’s new leaders, dismissed other Asian nations – with their stoic, thrifty populations taking direction from the state – as poor examples for Mongolia. Like the US, Mongolia’s nomadic heritage values freedom and individual effort over the state, assert government advisers such as Tserenpuntsag Batbold, an economic adviser to the Mongolian prime minister’s office.

Batbold is sanguine about finding a purpose for the country’s economy: “I’m always thinking about this, but I can’t give you an answer. This is exactly why we have to create a nondistortive economic environment, one which will show us the true comparative advantages of this nation (Asian Wall Street Journal 1997: May 27).”

Yet the process has been a difficult one. At a June 1998 international investors’ conference in Ulaanbaatar, the World Bank variously called Mongolia the “gateway to Russia”, the “gateway to China”, and the “gateway to Central Asia” (UB Post: 1998), giving the impression that both the global institutions and the Mongolian government would try anything in a desperate search for a purpose for the country’s economy. In fact, efforts in the 1990s to attract foreign direct investment (FDI) have not been fruitful. In 1999, FDI stood at US $70 million; it was US $200 million for all of the 1990s (Human Development Report Mongolia 2000). The belief that foreign private companies would pay for the country’s infrastructure improvements has run up against a wall: most foreign companies find it hard to see the benefits in investing in a country that only has a market of 2.4 million people and very high start-up costs.

By 1998, even Sachs was striking a pessimistic note. He told Fortune magazine he disagreed with the pace of reforms and insisted infrastructure improvements – more roads, improved livestock breeding, investment in information technology – were the only things that would improve the country’s economy (Fortune 1998: December 7).

Conclusion

Political power in Mongolia has switched from the hegemonic control of the Communist Party (and its overlords in Moscow) to be dispersed amongst a plethora of actors, including international aid organizations. Economic liberalisation has destroyed the state’s ability to guarantee a minimum standard of living. However, it has also expanded the number of small businesses in the country, and the GNP generated from the private sector has grown from 10 per cent of the total in 1990 to 64 per cent in 1999 (Human Development Report Mongolia 2000: 31). In spite of this, poverty rates remain stubbornly high, undermining assertions that free markets alone will generate wealth for the disadvantaged.

Unfortunately, Mongolia has significantly misdiagnosed the origins of prosperity in its current role model, the United States. Economic liberalisation policies cling to simplistic notions of the evolution of capitalist markets in the US, ignoring the complex relationship between state-funded or regulated infrastructure development and economic growth. Post-communist countries have been ill-advised on what policies will actually reduce poverty rates. These societies do not fit into conventional ideas of underdevelopment; on the whole their populations are highly literate and skilled. While products produced by these countries may not be able to compete head-on with more technologically sophisticated equivalents in Western markets, there is little evidence that wholesale destruction of these industries will spurn economic growth and reduce poverty.

Pax Chaotica: A Re-evaluation of Post-WWII Economic and Political Order

In The Interests Of The Exploited?: The Role Of Development Pressure Groups In The UK

The Sweet Smell Of Failure: The World Bank And The Persistence Of Poverty

ORCID iD: https://orcid.org/0000-0001-5311-1052.

© David South Consulting 2017