Mongolia in

							            His Excellency
Mr. Dalrain Davaasambuu
            Ambassador to the United Kingdom of Mongolia


      Mongolia in 2036:
  How to profit from the rise
 of an economic superpower
          Mongolia in 2036:
How to profit from the rise of
  an economic superpower

         The ideas in this presentation are not those of the
         Mongolian government but personal thoughts and
       calculations of Mr Davaasambuu based on existing
   official statistics. Presently, the Mongolian government
                             has no official 30-year strategy.
Double transition since 1990: Political and
economic reforms

  Several changes of government since 1990. Today,
   five parties are represented in Parliament; four parties
   are in the Cabinet
  Mongolians are enjoying fundamental human rights,
   democracy and freedom of information
  Democracy and rule of law have been achieved,
   despite a low level of economic development:
   “Democracy Without Prerequisites” See Steven Fish (1998),
   Mongolia: Democracy without Prerequisites, in: Journal of Democracy (9) 3 (July),
   127-141.
  Political and economic reforms occurred at the same
   time. Private sector produces >70% of GDP due to the
   privatisation of state enterprises and economic reforms since the centrally planned
   and command economic model was abandoned in the early 1990s
Economy now and 2036
Now                                    Thirty years from now
 GDP: xx billion $
 Per capita GDP 721 $                  10,000 $*
 Ínformal economy in % of              5-10 %
  GDP 30-40 %
 Population 2,6 mio.                   3,7 mio.
 Exports 950 mio. $                    15,000 mio. $
 Imports 1,100 mio. $                  14,500 mio. $

 *private estimate including informal economy
Development: Basis and Strategy
Landlocked and vulnerable            Strategy
 Small landlocked country between    Promote export oriented economy
   two big neighbours                   with high diversification
 High economic vulnerability           (Asia+Europe+America)
   according to UNDP ranking.         Strengthen industries with low
   Dependence on small number of        transport costs that use locally
   commodities (copper, gold,           available raw materials
   cashmere)                          Use duty-free access to EU
The China Factor:                     Establish status as transit country
 Few competitive advantages in         for energy and goods
   manufacturing vs. China            Develop tourism, agriculture and
 Chinas economic rise increases        produce some value added goods
   demand for metals like copper      Exploit Mongolia„s rich natural
                                        ressources with the help of foreign
                                        direct investment
                                      Invest in infrastructure
                                      Look for opportunities in
                                        knowledge-based sectors
A small but growing population
 From 1950 to 1990, the population almost tripled
  to 2,7 mio. now
 In the transition period 1989-2000, population
  growth droped to 1.4 % from 2.5 % in 1979-
  1989. This reflects the enormous socio-
  economic changes.
 Estimates suggest that the Mongolian population
  will amount to 3,6 mio. in 2035
 Research indicates that population growth will
  drop below the replacement level around 2025
  (less than 2,1 children per woman)
A new life for herdsmen

Non-intensive herding suits Mongolia„s
 natural conditions. Carrying capacity of the
 steppe limited to 30-40 mio. livestock
10 % of the population will live as
 herdsmen in 2036, from 15 % now.
 (410,000 herders then, 370,000 now)
Living arrangements will converge towards
 developed nations model, for example: 30
 % of herders„ households have TV now; all
 will have a TV in 2036
Tourism can make a big difference
Tourism created 5 % of Mongolia„s GDP in
 2004
25 % annual increase in income from
 tourism over the past five years
Amount of visitors doubled to 305,000
 from 2000 to 2004
If Mongolia maintains a 10 % annual
 increase over 30 years, we will have
 4 mio. visitors in 2036 (=population size)
Gaining from transit
 Mongolia plays an important role for the transit
  of goods and people between China, Russia,
  Europe and Asia at large (road, air, pipelines)
 Energy from Russia to China could go through
  Mongolia (increased by rising importance of
  renewable energy, eg hydroenergy from Russia)
 Route for trade in goods to Russia (Provide
  related service and gain access)
 Need to develop infrastructure and transport
  industry
Digging for development
 Mongolia is rich in resources: Copper, gold, iron,
  coal, phosphate etc.
 Recent commodity price boom makes
  Mongolia„s future more bright and promising
  Foreign investment has started, but
  development of mining stakes takes time (15
  years or more)
 Global underinvestment in metals, despite
  megatrend of rising demand (caused by
  economic rise of China)
 Proximity to China as a big advantage (low
  transport cost)
Economic impact of mining
 Copper and gold deposits at Oyu Tolgoi,
  exploited by Canadian company Ivanhoe Mines,
  could start operation in 2-3 years
 Over >35 years, 15 mio. t of copper and 11 mio.
  oz. of gold
 At 2005 prices, the value of exports from this
  mine project alone exceeds US$ 54 billion
 Ivanhoe estimates 34,3 % annual increase in
  real GDP and 9,3 % increase in nationwide
  consumer expenditure
International support
 Historically good relations to Russia, because of
  Russia„s role in optaining national independence in
  1921 and supporting modernization for 70 years
 China becomes Mongolia„s largest trading partner and
  source of FDI
 Developed democracies as trading partners and
  providers of development assistance (G7 protocol first
  mentionned support for Mongolia„s reforms at 1991
  London meeting)
 US president George Bush expressed support for
  Mongolia on his visit in November 2005
Summary: 800 years of statehood
 In 1206, Chinggis Khan united the Mongolian
  tribes and established a Mongolian state
 Independence in 1921
 Successful double transition since 1990
 Profiting from China„s economic rise
 In 2036, Mongolia will celebrate 830 years of
  statehood. To get an idea of what that will be
  like, please come to our country and attend the
  800-year celebrations taking place throughout
  2006.