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.