1. INTRODUCTION
1.2. BRIEF OVERVIEW OF MONGOLIA
1.2.2. ECONOMY
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gross domestic product-purchasing power parity (GDP - PPP) totaled $8.4 billion USD, with per capita of $3400 USD and GDP Nominal Total $5.243 billion and per capita
$1,975 USD.
Official language is Mongolian and territorial area is 1,564,115.75 km square. Semi-presidential republic, Semi-presidential and parliamentary elections are being held in every 4 years. Prime minister is being appointed by the parliament and the cabinet is nominated by the prime minister in consultation with the president and must be approved by the State Great Khural which is Mongolian parliament.
According to Global Peace Index by Institute for Economic and Peace Mongolia ranked 80 out of 144, and 115 out of 182 in Human Development Index by UN Development Program, Corruption Perception Index by Transparency International shows that Mongolia is 120th from 180 countries, and in Global Competitiveness report by World Economic Forum Mongolia is in 117 out of 133.
Ulaanbaatar, the capital and largest city, is home to about 38% of the population as well as the biggest business hub of the country.
1.2.2. ECONOMY
Economic activity in Mongolia has traditionally been based on agriculture and the breeding of livestock. Mongolia also has extensive mineral deposits: copper, coal, molybdenum, tin, tungsten, and gold account for a large part of industrial production.
After the democratic revolution in 1989-1990, free market system have been introduced to Mongolia and The Democratic Union Coalition (DUC) government, 1996–2000, has embraced free-market economics, easing price controls, liberalizing domestic and international trade, and attempting to restructure the banking system and the energy sector. Major domestic privatization programs have been undertaken, as well as fostering of foreign investment through international tender of the oil distribution company, a leading cashmere wool company, and banks. Nowadays most important businesses are considered as mining and due to explorations of world class deposits of mainly coal and
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copper.
Most exported commodities are copper, apparel, livestock, animal products, cashmere, wool, hides, fluorspar, other nonferrous metals, whereas, most imported commodities are machinery and equipment, fuel, automobile, food products, industrial consumer goods, chemicals, building materials, sugar, tea.
Mongolia has foreign trade relations with 118 foreign countries and 2009 total trade turnover hit USD $4033.9 million, out of which USD $1902.6 million is export and USD
$2131.3 million is import. In 2009, total trade turnover amount reduced with USD
$1745.1 million which is 30.2%, in which export declined by USD $631.9 million, 24.9%
and import fell down with USD $1113.3 million, 34.3%. Trade balance indicates trade deficit of USD $228.7 million in same year.
Figure 5. Mongolian international trade turnover in 2007-2009 Source: National Statistical Office Report 2009
Mongolia is becoming much dependent from mining industry, lately. Above graphic is the indication of Mongolian export, import and trade balance caused by the commodities price fall followed 2009 world financial crisis and economic downturn.
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Figure 6. Total sales and in subsectors on monthly basis as of 2009 Source: National Statistical Office Report 2009
2010 January, Dale Choi, on his professional blog, wrote that “According to National Statistical Office of Mongolia, even with 68% Windfall Profit Tax (WPT) on gold in 2009 Mongolia exported 11.4 tons of gold in processed and unprocessed form worth 326 million USD constituting 18.4% of exports. Prominent economist D.Jargalsaikhan estimates that due to WPT on gold about 20 tons of gold is produced and exported illegally. WPT on gold will be invalidated starting January 1, 2011”. This will positively effect for economy in 2010 years. Moreover, sources predict to be more positive from start of 2010. For instance, on its 2009 May report, the economist intelligence unit of Columbia international affairs online forecasted that Mongolian economic growth as
“Given the continued deterioration in the external and domestic environment, combined with tighter fiscal policy, we have revised down our forecast for real GDP growth this year, to 2.5%. Growth will pick up in 2010 as commodity prices begin to recover. The upturn could be reasonably strong, provided that the government can resolve outstanding mining investment deals, allowing the sector to benefit from strong foreign direct investment (FDI) inflows. However, the recent deterioration in the economy has highlighted the problems caused by Mongolia's narrow tax and export base (it is dominated by copper and gold), which leaves export earnings and government revenue exposed to fluctuations in global prices for commodities.”
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In nutshell, the economy is expected to be better due to adoption of Invalidation law of windfall profit tax on gold, as well as increase in world commodities price, especially in metals starting from 2010.
Figure 7. Gold price in last 30 years Source: http://goldprice.org
Figure 8. World coal consumption Source: www.freecharts.com
Figure 9. Copper price in 2000-2010
Source: http://www.infomine.com
Figure 10. Coal price in 2002-2008 Source: McCloskey Coal Price Index; “The Renaissance & the Economics of Steam Coal”
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Education in Mongolia follows the kindergarten, twelve years of primary and secondary school, and university. After a decline in enrollment ratios during the transition to a market economy in the 1990, school attendance is now once more near-universal:
primary school attendance rate is estimated at 97%, and adult literacy at 98%. Mongolia's school system, previously based on the ten-year school, has been placed with twelve years of education. The official school entrance age has lowered to six starting from 2008.
Compulsory education is eight years and government policy and plan is in direction of encouraging to continue next level education or at least to maintain at this level by decreasing the drop out numbers.
Secondary Education
Secondary education is covering sixth to twelfth grades. Usually secondary schools consist of public schools, however in Ulaanbaatar and cities like Darkhan, Erdenet there are private schools are being established though of mixed quality. In recent years Ulaanbaatar also has had some foreign-language themed public schools, for example Russian, Chinese, English and private and public high schools specializing on scientific programs besides the emphasis on language. Lately, numbers of new private high schools are increasing in numbers as market segmentations are increasing due to social class disparity that is caused by system changes started in 1990s.
Overall, government policy is on a side to support the increasing number of private primary and secondary schools.
Higher Education
It used to be only public universities in main industry fields and number of university students, education services are provided and controlled by strict state policy. Even today, after the system changes in 1990s and following 20 years where private education services are allowed to be initiated, those public universities are considered as prestigious