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Economy of Mongolia

Economic activity in Mongolia has traditionally been based on herding and agriculture. Mongolia has extensive mineral deposits; copper, coal, molybdenum, tin, tungsten, and gold account for a large part of industrial production. Soviet assistance, at its height one-third of GDP, disappeared almost overnight in 1990-91 at the time of the dismantlement of the U.S.S.R., leading to a very deep recession. Economic growth returned due to reform embracing free-market economics and extensive privatization of the formerly state-run economy. Severe winters and summer droughts in 2000-2001 and 2001-2002 resulted in massive livestock die-off and anemic GDP growth of 1.1% in 2000 and 1% in 2001. (A severe 2009-2010 winter is also underway, with two million or more livestock already dead; the economic impact will not be fully known until late spring.) Economic activity in Mongolia has traditionally been based on herding and agriculture, although development of extensive mineral deposits of copper, coal, molybdenum, tin, tungsten, and gold have emerged as a driver of industrial production. Soviet assistance, at its height one-third of GDP, disappeared almost overnight in 1990-91 at the time of the dismantlement of the U.S.S.R., leading to a very deep recession. Economic growth returned due to reform embracing free-market economics and extensive privatization of the formerly state-run economy. Severe winters and summer droughts in 2000-2001 and 2001-2002 resulted in massive livestock die-off and anemic GDP growth of 1.1% in 2000 and 1% in 2001. This was compounded by falling prices for Mongolia's primary-sector exports and widespread opposition to privatization. Growth improved to 4% in 2002, 5% in 2003, 10.6% in 2004, 6.2% in 2005, and 7.5% in 2006. Because of a boom in the mining sector, Mongolia had high growth rates in 2007 and 2008 (9.9% and 8.9%, respectively). Due to the severe 2009-2010 winter, Mongolia lost 9.7 million animals, or 22% of total livestock. This immediately impacted meat prices, which increased twofold; GDP dropped 1.6% in 2009. Growth began anew in 2010, with GDP increasing some 7% as Mongolia emerged from the economic crisis. Besides mining (21.8% of GDP) and agriculture (15% of GDP), dominant industries in the composition of GDP are trade and service, transportation and storage, and communication. Mongolia's economy continues to be heavily influenced by its neighbors. For example, Mongolia purchases nearly all of its petroleum products from Russia. China is Mongolia's chief export partner and a main source of the "shadow," or "gray," economy. The gray--largely cash--economy is estimated to be at least one-third the size of the official economy, but actual size is difficult to quantify since the money does not pass through the hands of tax authorities or the banking sector. Remittances from Mongolians working abroad, both legally and illegally, constitute a sizeable portion. Money laundering is growing as an accompanying concern. Mongolia, which joined the World Trade Organization in 1997, is the only member of that organization to not be a participant in a regional trade organization. Mongolia seeks to expand its participation and integration into Asian regional economic and trade regimes. Because of Mongolia's remoteness and natural beauty, the tourism sector offers potential for growth. Prior to the onset of the global economic crisis, spiking international commodity prices led to a surge of international interest in investing in Mongolia's minerals sector despite the absence of a policy environment firmly conducive to private investment; the end of the crisis brought a return of the attention of foreign investors. How effectively Mongolia mobilizes private international investment around its comparative advantages (mineral wealth, small population, and proximity to China and its burgeoning markets) will ultimately determine its success in sustaining rapid economic growth. Tax reforms enacted on January 1, 2007 and other mining policies helped government revenues jump 33% in 2007. Meanwhile, major amendments to the minerals law allowed the government to take an equity stake in major new mines. Major development slowed in late 2007 and early 2008 as Mongolia's parliament proved unwilling to move on major deals and declined to reform mining laws that observers said substantially varied from best practices. This frustrated many foreign and domestic investors and others who hoped to see Mongolia's promising mining sector grow rapidly. In 2009, sharp drops in commodity prices and the effects of the global financial crisis began to be felt in Mongolia's economy. The local currency dropped some 40% against the U.S. dollar, and two of the 16 commercial banks have since been taken into receivership, but a series of quick and effective moves, including a Stand-By Arrangement with the International Monetary Fund (IMF), helped maintained stability and has kicked off a broad discussion on fiscal and financial reforms. That program concluded successfully in late 2010, but both the IMF and World Bank have since criticized Mongolia for returning to potentially dangerous pro-cyclical policies in 2011. In summer 2009 the government negotiated an “Investment Agreement” with Rio Tinto and Ivanhoe Mines to develop the Oyu Tolgoi copper and gold deposit. On August 25, 2009, parliament passed four laws--one repealing the windfall profits tax, one adjusting corporate tax structures to accommodate large-scale projects, and two involving infrastructure--necessary to allow the signing of the deal. The deal was concluded in a gala signing ceremony on October 6, 2009, and the agreement went into full legal force 6 months later, on April 6, 2010. Environment Based on a tradition going back to the era of Chinggis Khan, the government of Mongolia expresses public commitment to restoring and protecting its natural resources. As a result of rapid urbanization and industrial growth policies under the socialist regime, however, Mongolia's deteriorating environment remains a major concern. The burning of soft coal by individual home or "ger" (yurt in Russian) owners, power plants, and factories in Ulaanbaatar has resulted in severely polluted air. Continued overgrazing, increased crop production, and mining development have increased soil erosion and polluted waters. Protecting what remains has policy priority over reclaiming damaged land, although the government recently created a special restoration fund financed by polluter fees. In addition, the government is making significant efforts to introduce sustainable energy projects in an effort to reduce reliance on aging power plants. GDP (2010 est.): 8.25 trillion Mongolian Tugruks/MNT (U.S. $6.8 billion at current exchange rates). GDP growth (2010): 7%. Per capita GDP (2010): approx. $2,008. Natural resources: Coal (thermal and metallurgical), copper, molybdenum, silver, iron, phosphates, tin, nickel, zinc, wolfram, fluorspar, gold, uranium, and petroleum. Agriculture (15% of 2010 GDP, livelihood for about 40% of population): Products --livestock and byproducts, hay fodder, vegetables. Industry (31% of 2009 GDP, composed of mining 21.8%, manufacturing 6.4%, and utilities (electricity, gas, and water) 2.4%: Types --minerals (primarily copper and gold), animal-derived products, building materials, food/beverage. Trade: Total turnover of foreign trade for 2010 was $6.2 billion. Exports --$2.9 billion (U.S. dollar (USD) figures based on current USD/MNT exchange rate): minerals, livestock, animal products, and textiles. Markets --Asian countries (approx. 87.4%), European countries (approx. 4.5%), and countries of American continent (approx. 5.1%). Imports --$3.3 billion: machinery and equipment, fuels, food products, industrial consumer goods, chemicals, building equipment, vehicles, textiles. Suppliers --91 countries account for 93.2% of total imports, of which European countries (46.5%) and Asian countries (47.3%). Aid received: From 1991-2009, official development assistance to Mongolia from bilateral and multilateral donors totaled over $4.056 billion. Received $357.47 million in official development assistance in 2009. Fiscal year: Calendar year.

Geography of Mongolia

Mongolia has a 3485km (2165-mile) border with the Russian Federation in the north and a 4670km (2902-mile) border with China in the south. From north to south it can be divided into four areas: mountain-forest steppe, mountain steppe and, in the extreme south, semi-desert and desert (the latter being about 3 per cent of the entire territory). The majority of the country has a high elevation, with the principal mountains concentrated in the west. The highest point is the peak of Tavan Bogd, in the Altai Mountains, at 4374m (14,350ft). The lowest point, Khukh Nuur lake, in the east, lies at 560m (1820ft). There are several hundred lakes in the country and numerous rivers, of which the Orkhon is the longest at 1124km (698 miles). Official Name: Mongolia Area: 1,566,500 sq. km. (604,103 sq. mi.); slightly larger than Alaska (land boundaries 8,114 km.). Terrain: Almost 90% of land area is pasture or desert wasteland, of varying usefulness; 1% arable; 9% forested. Climate: Continental, with little precipitation and sharp seasonal fluctuations.

Government of Mongolia

Until 1990, the Mongolian Government was modeled on the Soviet system; only the communist party--the MPRP--officially was permitted to function. After some instability during the first 2 decades of communist rule in Mongolia, there was no significant popular unrest until December 1989. Collectivization of animal husbandry, introduction of agriculture, and the extension of fixed abodes were all carried out without perceptible popular opposition. The birth of perestroika in the former Soviet Union and the democracy movement in Eastern Europe were mirrored in Mongolia. The dramatic shift toward reform started in early 1990 when the first organized opposition group, the Mongolian Democratic Union, appeared. In the face of extended street protests in subzero weather and popular demands for faster reform, the politburo of the MPRP resigned in March 1990. In May, the constitution was amended, deleting reference to the MPRP's role as the guiding force in the country, legalizing opposition parties, creating a standing legislative body, and establishing the office of president. Mongolia's first multi-party elections for a People's Great Hural were held on July 29, 1990. The MPRP won 85% of the seats. The People's Great Hural first met on September 3 and elected a president (MPRP), vice president (SDP--Social Democrats), prime minister (MPRP), and 50 members to the Baga Hural (small Hural). The vice president also was chairman of the Baga Hural. In November 1991, the People's Great Hural began discussion on a new constitution, which entered into force February 12. In addition to establishing Mongolia as an independent, sovereign republic and guaranteeing a number of rights and freedoms, the new constitution restructured the legislative branch of government, creating a unicameral legislature, the State Great Hural (SGH). The 1992 constitution provided that the president would be elected by popular vote rather than by the legislature as before. In June 1993, incumbent Punsalmaagiyn Ochirbat won the first popular presidential election running as the candidate of the democratic opposition. In May 2009, Tsakhiagiin Elbegdorj defeated Nambaryn Enkhbayar in the first instance in Mongolia of an incumbent losing a presidential election. This was also the first election as president of a Democratic Party candidate. As the supreme government organ, the SGH is empowered to enact and amend laws, determine domestic and foreign policy, ratify international agreements, and declare a state of emergency. The SGH meets semiannually for 3-4 month sessions. SGH members elect a chairman and vice chairman who serve 4-year terms. SGH members are popularly elected by district to 4-year terms. The SGH sits for the full 4 years until a subsequent parliamentary election and cannot be dissolved. The president is the head of state, commander in chief of the armed forces, and head of the National Security Council. He is popularly elected by a national majority for a 4-year term and limited to two terms. The constitution empowers the president to propose a prime minister, call for the government's dissolution in consultation with the SGH chairman, initiate legislation, veto all or parts of legislation (the SGH can override the veto with a two-thirds majority), and issue decrees, which become effective with the prime minister's signature. In the absence, incapacity, or resignation of the president, the SGH chairman exercises presidential power until inauguration of a newly elected president. The president may also declare a state of emergency if the SGH is in recess and cannot be summoned in a timely manner; the SGH may then, upon reconvening, revoke such a declaration of emergency within 7 days of its issuance. The government, headed by the prime minister, has a 4-year term. The prime minister is nominated by the president and confirmed by the SGH. Under constitutional changes made in 2001, the president is required to nominate the prime ministerial candidate proposed by a party or coalition with a majority of members of the SGH. The prime minister chooses a cabinet, subject to SGH approval. Dissolution of the government occurs upon the prime minister's resignation, simultaneous resignation of half the cabinet, or after an SGH vote for dissolution. Local hurals are elected by the 21 aimags (provinces) plus the capital, Ulaanbaatar. On the next lower administrative level, they are elected by provincial subdivisions and urban sub-districts in Ulaanbaatar and all aimags. Political Parties Mongolian People's Revolutionary Party Democratic Party Motherland-Mongolian Democratic New Socialist Party National New Party Civil Will Party Mongolian People's Party Mongolian Green Party Mongolian Traditional United Party Mongolian National Solidarity Party Mongolian Liberal Democratic Party Mongolian Republican Party Mongolian Women's National United Party Mongolian Liberal Party Mongolian Social Democratic Party Freedom Implementing Party The Civil Movement Party The Development Program Party Mongolian Democratic Development Party Legal System The 1992 constitution empowered a General Council of Courts (GCC) to select all judges and protect their rights. The Supreme Court is the highest judicial body. Supreme Court justices are nominated by the GCC and confirmed by the president; the SGH must be made aware of the nominations but cannot block them. The Supreme Court is constitutionally empowered to examine all lower court decisions upon appeal and provide official interpretations on all laws except the constitution. Specialized civil and criminal courts exist at all levels and are subject to Supreme Court supervision. Administrative courts exist at the province and city levels only and are also subject to Supreme Court supervision. Local authorities--district and city governors--ensure that these courts abide by presidential decrees and SGH decisions. At the apex of the judicial system is the Constitutional Court, which consists of nine members, including a chairman, appointed for 6-year terms, whose jurisdiction extends solely over the interpretation of the constitution. Principal Government Officials President--Tsakhiagiin Elbegdorj Prime Minister--Sukhbaatariin Batbold Mongolia maintains an embassy in the United States at 2833 M Street, NW, Washington, DC, 20007; tel. (202) 333-7117, fax (202) 298-9227. Type: Multiparty parliamentary form of government. Independence: gained in 1921; in 1990, democratic reform begun and shift from dependence on the former Soviet Union declared. Constitutions: 1960 and February 12, 1992. Branches: Executive--power is divided between a president (elected by a popular election in May 2005) and prime minister (current cabinet nominated by the prime minister was approved in December 2007 by the State Great Hural elected in June 2004). Legislative--State Great Hural (76 deputies). Judicial--Constitutional Court is empowered to supervise the implementation of the constitution, makes judgment on the violation of its provisions, and solves disputes. Legal code based on Continental and Russian law. Legal education at Mongolian State University and private universities. Mongolia accepts International Court of Justice jurisdiction. Political parties: 18 registered political parties. Suffrage: Universal at 18. Administrative subdivisions: 21 aimags (provinces) and one city (Ulaanbaatar).

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History of Mongolia

In 1203 AD, a single Mongolian state was formed based on nomadic tribal groupings under the leadership of Genghis Khan. He and his immediate successors conquered nearly all of Asia and European Russia and sent armies as far as central Europe and Southeast Asia. Genghis Khan's grandson Kublai Khan, who conquered China and established the Yuan dynasty (1279-1368 AD), gained fame in Europe through the writings of Marco Polo. Although Mongol-led confederations sometimes exercised wide political power over their conquered territories, their strength declined rapidly after the Mongol dynasty in China was overthrown in 1368. The Manchus, a tribal group which conquered China in 1644 and formed the Qing dynasty, were able to bring Mongolia under Manchu control in 1691 as Outer Mongolia when the Khalkha Mongol nobles swore an oath of allegiance to the Manchu emperor. The Mongol rulers of Outer Mongolia enjoyed considerable autonomy under the Manchus, and all Chinese claims to Outer Mongolia following the establishment of the republic have rested on this oath. In 1727, Russia and Manchu China concluded the Treaty of Khiakta, delimiting the border between China and Mongolia that exists in large part today. Outer Mongolia was a Chinese province (1691-1911), an autonomous state under Russian protection (1912-19), and again a Chinese province (1919-21). As Manchu authority in China waned, and as Russia and Japan confronted each other, Russia gave arms and diplomatic support to nationalists among the Mongol religious leaders and nobles. The Mongols accepted Russian aid and proclaimed their independence of Chinese rule in 1911, shortly after a successful Chinese revolt against the Manchus. By agreements signed in 1913 and 1915, the Russian Government forced the new Chinese Republican Government to accept Mongolian autonomy under continued Chinese control, presumably to discourage other foreign powers from approaching a newly independent Mongolian state that might seek support from as many foreign sources as possible. The Russian revolution and civil war afforded Chinese warlords an opportunity to re-establish their rule in Outer Mongolia, and Chinese troops were dispatched there in 1919. Following Soviet military victories over White Russian forces in the early 1920s and the occupation of the Mongolian capital Urga in July 1921, Moscow again became the major outside influence on Mongolia. The Mongolian People's Republic was proclaimed on November 25, 1924. Between 1925 and 1928, power under the communist regime was consolidated by the Mongolian Peoples Revolutionary Party (MPRP). The MPRP left gradually undermined rightist elements, seizing control of the party and the government. Several factors characterized the country during this period: Tthe society was basically nomadic and illiterate; there was no industrial proletariat; the aristocracy and the religious establishment shared the country's wealth; there was widespread popular obedience to traditional authorities; the party lacked grassroots support; and the government had little organization or experience. In an effort at swift socioeconomic reform, the leftist government applied extreme measures which attacked the two most dominant institutions in the country--the aristocracy and the religious establishment. Between 1932 and 1945, their excess zeal, intolerance, and inexperience led to anti-communist uprisings. In the late 1930s, purges directed at the religious institution resulted in the desecration of hundreds of Buddhist institutions and imprisonment of more than 10,000 people. During World War II, because of a growing Japanese threat over the Mongolian-Manchurian border, the Soviet Union reversed the course of Mongolian socialism in favor of a new policy of economic gradualism and buildup of the national defense. The Soviet-Mongolian army defeated Japanese forces that had invaded eastern Mongolia in the summer of 1939, and a truce was signed setting up a commission to define the Mongolian-Manchurian border in the autumn of that year. Following the war, the Soviet Union reasserted its influence in Mongolia. Secure in its relations with Moscow, the Mongolian Government shifted to postwar development, focusing on civilian enterprise. International ties were expanded, and Mongolia established relations with North Korea and the new communist governments in eastern Europe. It also increased its participation in communist-sponsored conferences and international organizations. Mongolia became a member of the United Nations in 1961. In the early 1960s, Mongolia attempted to maintain a neutral position amidst increasingly contentious Sino-Soviet polemics; this orientation changed in the middle of the decade. Mongolia and the Soviet Union signed an agreement in 1966 that introduced largescale Soviet ground forces as part of Moscow's general buildup along the Sino-Soviet frontier. During the period of Sino-Soviet tensions, relations between Mongolia and China deteriorated. In 1983, Mongolia systematically began expelling some of the 7,000 ethnic Chinese in Mongolia to China. Many of them had lived in Mongolia since the 1950s, when they were sent there to assist in construction projects. Chronology of Mongolian History 1921-Present March 13, 1921: Provisional People's Government declares independence of Mongolia. May 31, 1924: U.S.S.R. signs agreement with Peking government, referring to Outer Mongolia as an "integral part of the Republic of China," whose "sovereignty" therein the Soviet Union promises to respect. May-September 16, 1939: Large scale fighting takes place between Japanese and Soviet-Mongolian forces along Khalkhyn Gol on Mongolia-Manchuria border, ending in defeat of the Japanese expeditionary force. Truce negotiated between U.S.S.R. and Japan. October 6, 1949: Newly established People's Republic of China accepts recognition accorded Mongolia and agrees to establish diplomatic relations. October 1961: Mongolia becomes a member of the United Nations. January 27, 1987: Diplomatic relations established with the United States. December 1989: First popular reform demonstrations. Mongolian Democratic Association organized. January 1990: Large-scale demonstrations demanding democracy held in sub-zero weather. March 2, 1990: Soviets and Mongolians announce that all Soviet troops will be withdrawn from Mongolia by 1992. May 1990: Constitution amended to provide for multi-party system and new elections. July 29, 1990: First democratic elections held. September 3, 1990: First democratically elected People's Great Hural takes office. February 12, 1992: New constitution goes into effect. April 8, 1992: New election law passed. June 28, 1992: Election for the first unicameral legislature (State Great Hural). June 6, 1993: First direct presidential election. June 30, 1996: Election resulted in peaceful transition of power from former communist party to coalition of democratic parties. From 1998-2000, four prime ministers and a series of cabinet changes. In early 2000, Democratic Coalition dissolved. July 2, 2000: Election resulted in victory for the former communist Mongolian Peoples Revolutionary Party (MPRP); first-past-the-post electoral system enabled MPRP, with 52% of the popular vote, to win 95% of the parliamentary seats; formation of new government by Prime Minister N. Enkhbayar. June 27, 2004: Motherland-Democracy Coalition formed in early 2004 to contest the parliamentary election. Election resulted in roughly 50/50 split of parliamentary seats between former communist party and democratic opposition and formation of new government by Prime Minister T. Elbegdorj (Democratic Party). January 2006: MPRP ministers resigned from the government, and the government dissolved. A new coalition government was formed, led by the MPRP with the participation of four smaller parties. October 2007: MPRP ousts its leader, Prime Minister Enkhbold, who resigns as Prime Minister. The new leader of the MPRP, Sanjaa Bayar becomes Prime Minister. Prime Minister Bayar forms a new cabinet.

People of Mongolia

Life in sparsely populated Mongolia has recently become more urbanized. Nearly half of the people live in urban centers, including the capital, Ulaanbaatar. Semi-nomadic life still predominates in the countryside, but settled agricultural communities are becoming more common. Mongolia's birth rate is estimated at 25.1 births per 1,000 people (2009 est.). About 58% of the total population is under age 30, 47.8% of whom are under 14. Ethnic Mongols account for about 95% of Mongolia's population and consist of Khalkha and other groups, all distinguished primarily by dialects of the Mongol language. Mongol is an Altaic language--from the Altaic Mountains of Central Asia, a language family comprising the Turkic, Tungusic, and Mongolic subfamilies--and is related to Turkic (Uzbek, Turkish, and Kazakh), Korean, and, possibly, Japanese. Among ethnic Mongols, the Khalkha comprise 90% and the remaining 10% include Dorvod, Tuvan, and Buriat Mongols in the north and Dariganga Mongols in the east. Turkic speakers (Kazakhs, Turvins, and Khotans) constitute 5% of Mongolia's population, and the rest are Tungusic-speakers. Most Russians left the country following the withdrawal of economic aid and collapse of the Soviet Union in 1991. Traditionally, Buddhist Lamaism was the predominant religion. However, it was suppressed under the communist regime until 1990, with only one showcase monastery allowed to remain. Since 1990, as liberalization began, Buddhism has enjoyed a resurgence. About 4 million ethnic Mongols live outside Mongolia; about 3.4 million live in China, mainly in the Inner Mongolia Autonomous Region, and some 500,000 live in Russia, primarily in Buryatia and Kalmykia. Nationality: Noun and adjective --Mongolian(s). Population (2009): 2.735 million. Annual population growth rate (2009): 1.4%. Health: Infant mortality rate (under 1 year)--19.4/1,000 (2008); 20/1,000 (2009). Life expectancy --67 yrs. (2008); 67.9 yrs. (2009). Ethnic groups (2004): About 95% Mongol (predominantly Khalkha); 5% Turkic (largest group, Kazakh); Buriat. Language: Mongolian. Religions (2004): Buddhist Lamaism 50%, Muslim 4% (primarily in the southwest), shamanist and Christian 6%, and none 40%. Education: Years compulsory --9 (provided free by the government). Literacy --98%.