Mongolia’s economy is based on just two sectors – minerals and livestock.

The number one export is copper, with significant amounts of gold, molybdenum, fluorspar and uranium. In total, minerals account for more than a third of Mongolia’s GDP, and this proportion is rising as the country builds the necessary infrastructure to extract its mineral wealth. Already Mongolia produces nearly 15% of the world’s fluorspar and is a significant exporter of copper, molybdenum and uranium.

Agriculture accounts for a further 30% of the nation’s GDP, using nearly 80% of the land and employing almost half of the working population. While Mongolia produces small quantities of grains, potatoes and vegetables, the main form of agriculture is animal husbandry. Mongolia’s 170,000 herding households care for a total of 30 million head of livestock and produce meat, wool, cashmere and hides for the local market and for export. About 30% of the world’s raw cashmere exports are from Mongolia.

The recent changes in the economy after 70 years of communism and Russian influence has had far-reaching effects on Mongolia’s economy. At its height, Soviet assistance (mostly in the form of subsidies) had totalled US$900 million, or 30% of Mongolia’s GDP. Now this is gone. Meanwhile Mongolia, like Russia, has moved from a centrally planned to a market economy.

Few of the recently privatised companies and enterprises have had the knowledge or resources to succeed under the new system. Hampered by the general lack of infrastructure (especially for transport and energy) and a legacy of overstaffing and inefficiency, the expected boom in production has not occurred.

The reforms have been too fast for the country’s social and economic infrastructure. Between 1990 and 1995, Government social spending decreased by 47% in real terms, with especially severe effects on education and health. Inflation, unemployment and crime are all rife, but the country’s social welfare system, once of first-world standard, has collapsed, leaving the rising numbers of poor with no safety net.

In June 1995 it was estimated that 36% of the population were poor, up from 15% just four years earlier. Malnutrition is also increasingly common. The Asian Development Bank recently reported that only 33% of households have an adequate diet, and that an alarming 31% are below the starvation level. A recent nutrition survey found that a third of the population had not consumed any vegetables in the previous month. As a result, many children suffer vitamin deficiencies, anaemia and stunting, leaving them at the mercy of infection.

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