ERI Working paper No.14
Mongolian Reforming Process to a Market Economy

November 1992
Budsuren Tumen
(Senior Adviser to the President of Mongolia)


For most of the last seven decades, the whole economy, form agriculture to heavy industry, fell under the direction of central planners and cooperative leaders. These policies have resulted in a highly distorted economy, with inefficient use of state assets, slow growth and stagnation. The political and economic isolation of Mongolia form the Western world has been supported by its geographic location. These are virtually no rail or road transportation facilities between Mongolia and Western countries, and air links are infrequent and pass through China or the former USSR.

With the advent of Perestroika a strong reformist movement surfaced in Mongolia. The movement gained official power in elections to the parliament and the government in Mongolia now consists of members of several political parties with various backgrounds. The aim of the government is to quickly transform the Mongolian economy form a centrally planned system to a market economy.

The rise of this movement, and the move to democracy has coincided with a severe and dangerous economic collapse.

The Mongolian economy has suffered a decline in real income which rivals the decline experienced in Western countries during the great depression, or as a result of wartime destruction. The country was critically dependent upon the former USSR for decades. During the 1980s over 85% of foreign trade was with the USSR, and the annual trade deficit, which amounted to 25% of GNP, was financed almost entirely by the Soviets. As a result of the new economic association between our two countries, on January 1, 1991 this relationship abruptly ended. The annual trade and budgetary financing form the USSR stopped. Trade with the USSR fell by half, and Soviet technicians withdrew form Mongolian enterprises and factories.

These historical heritage and the external and internal factors of the current day have made last two years a very hard time for Mongolia and the Mongolian people.

Mongolians are firmly devoted to the process of reforms once chosen and furthering the democratization and modernization, with the support and cooperation of international community assisting Mongolia.

Structure of the whole text

  1. page1
    1. page1
      I. Transition to a Market Economy
    2. page5
      II. Economic Crisis
    3. page10
      III. Acceleration of Economic Reforms
  2. Appendix
    1. page15
      Present Condition of Mongolian Economy
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