ULAANBAATAR, Mongolia — With 28 percent of the population living at or below the poverty line and widespread government corruption, first glance paints a somewhat sour picture of Mongolia. That is, however, far from the whole story, as the fledgling democracy has come a long way since being part of the Soviet Union and has one of the fastest growing economies in the world.
A few years after the Soviet Union dissolved in 1990, poverty in Mongolia was around 60 percent. Much of the population lived in rural areas and was accustomed to having employment and their basic necessities guaranteed by the government.
When Russia suddenly closed and dismantled its factories and stopped providing financial assistance, Mongolians were unprepared to move to a market based economy and private capitol was held by only a few.
Small livestock farmers found it impossible to compete with the few large ranch owners and most miners and factory workers had no job and little private wealth to start a new career. Much of Mongolia’s population fled to the cities in the hopes of making a new life; Ulaanbaatar, the capital, was hit hardest by this mass migration.
By 2007, more than half of the country lived in major cities and today a third of the nation’s population live in Ulaanbaatar alone. Most of the rural refugees arrived with little to nothing and, quite literally, put up tent around the city’s edges in slums called ‘Ger’. The term Ger refers to traditional circular animal skin tents that come from Mongolia’s nomadic past.
These Ger offer little warmth during the country’s windy and extremely cold winters and, obviously, have no sanitation or access to clean water. Habitation in Ger areas varies significantly as some who live there even have two-story homes. Access to basic services like water and power, though, remains quite limited and expensive.
60 percent of Ulaanbaatar’s 1.1 million people live in these slums and some 55 percent of Ger residents subsist in poverty.
Raising the overall living standards of these people is one of the country’s largest challenges and increasing employment will be critical to reaching that goal. Mongolia’s economy has grown at around 9 percent per year for over a decade.
This substantial growth has come thanks, in large part, to the country’s vast mineral resources.
Gold, copper and coal are the biggest exports and mining is responsible for about 40 percent of the government’s total revenue. Profit generated from this industry has not benefited Mongolians equally, as only 5 percent of the nation is employed by mining and government corruption has minimized the impact of revenues.
In 2011, Transparency International surveyed 180 countries to gauge government corruption and Mongolia was in 120th place. The government lacks transparency in how finances are being spent and many voters lack access to information about political processes in general. Reducing poverty in Mongolia to 18 percent by 2015 is one of the country’s stated goals, but faith of the people in reaching that goal is limited as long the government lacks credence.
The Future of Mongolia
Dutch disease could be another factor fueling inequality in Mongolia. When a country’s exports of raw materials substantially outpaces growth in manufacturing or agriculture, it can create long-term instability, referred to as Dutch disease. This is certainly the case in Mongolia where the high demand for gold, copper, and coal has led to rapid growth but manufacturing has not kept pace.
Agriculture, specifically livestock, employs the largest single portion of the workforce but the number of employed continues to dwindle as technology has not advanced to cope with worsening climate conditions like frequently severe winters and summer drought.
Despite the adversities, poverty has dropped 10 percent since 2010 and work is being done to combat Mongolia’s instability. USAID has been a key player in aiding constructive change and has spent the majority of its resources in Mongolia over the last three years in rooting out corruption and helping diversify the economy.
Through stimulating the private sector with loans and career training along with supporting transparency and increased voter participation, foreign support is helping reduce poverty in Mongolia and move toward long-term sustainability.