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Mongolia: The Economy
Country Study > Chapter 3 > The Economy

THE ECONOMY


On the eve of the 1921 revolution, Mongolia had an underdeveloped, stagnant economy based on nomadic animal husbandry. Farming and industry were almost nonexistent; transportation and communications were primitive; banking, services, and trade were almost exclusively in the hands of foreigners. Most of the people were either illiterate nomadic herders or monks. Property in the form of livestock was owned primarily by aristocrats and monasteries; ownership of the remaining sectors of the economy was dominated by foreigners. Mongolia's new rulers thus were faced with a daunting task in building a modern, socialist economy.

Mongolia's economic development under communist control can be divided into three periods: 1921-1939; 1940-1960; and 1961 to the present. During the first period, which the Mongolian government called the stage of "general democratic transformation," the economy remained primarily agrarian and underdeveloped. After an abortive attempt to collectivize herders, or arads, livestock raising remained in private hands. The state began to develop industry based on processing of animal husbandry products and crop raising on state farms. Transportation, communications, domestic and foreign trade, and banking and finance were nationalized with Soviet assistance; they were placed under the control of Mongolian state and cooperative organizations or Mongolian-Soviet joint-stock companies. Ulaanbaatar became the nation's industrial center.

During the second period, called the "construction of the foundations of socialism," agriculture was collectivized, and industry was diversified into mining, timber processing, and consumer goods production. Central planning of the economy began in 1931 with an abortive five-year pland and with annual plans in 1941; five-year plans began a new with the First Five-Year Plan (1948-52). Soviet aid increased, financing the construction of the trans-Mongolia railroad -- the Ulaanbaatar Railroad -- and various industrial projects. China also provided assistance, primarily in the form of labor for infrastructure projects. Although industrial development still was concentrated in Ulaanbaatar, economic decentralization began with the completion of the Ulaanbaatar Railroad and the establishment of food processing plants in aymag centers.

The third stage, which the government called the "completion of the construction of the material and technical basis of socialism," saw further industrialization and agricultural growth, aided largely by Mongolia's joining the Council for Mutual Economic Assistancein 1962. Soviet and East European financial and technical assistance in the forms of credits, advisers, and joint ventures enabled Mongolia to modernize and to diversify industry, particularly in mining. New industrial centers were built in Baga Nuur, Choybalsan, Darhan, and Erdenet, and industrial output rose significantly. Although animal husbandry was stagnant, crop production increased dramatically with the development of virgin lands by state farms. Foreign trade with Comecon nations grew substantially. Transportation and communications systems were improved, linking population and industrial centers and extending to more remote rural areas. In the late 1980s, Mongolia had developed into an agricultural-industrial economy, but the inefficiencies of a centrally planned and managed economy and the example of perestroika in the Soviet Union led Mongolian leaders to undertake a reform program to develop the economy further.

Data as of June 1989




Last Updated: June 1989


Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for Mongolia was first published in 1989. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on Factba.se.

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