Industry

Animal herding is the main economic activity and is practiced throughout the country. Manufacturing is devoted largely to the processing of agricultural and livestock products. Mining is also important, but most of the country’s mineral deposits remain unexploited. In 2006 the gross domestic product (GDP) was $3.13 billion, or about $1,211.90 per capita.

During the communist period from 1924 to 1990, the state controlled all industry and trade, through either direct ownership or cooperatives. The government of Mongolia followed the economic model of the USSR, implementing a series of five-year plans beginning in 1948. Mongolia received large-scale Soviet aid to help it increase industrial and agricultural production. The development focused primarily on the industrial sector, and new cities were built near several new mining centers in northern Mongolia.

In 1990 Mongolia began a process of economic reform to phase out the state-controlled economic system in favor of a market-oriented economy. That year a foreign investment law was enacted, making possible the participation of foreigners in a variety of businesses, ranging from firms wholly owned by foreigners to joint ventures with Mongolian enterprises. Many new laws pertaining to taxation, banking, and debt were passed.

In 1991 a privatization law went into effect, by which state-owned property and enterprises began to be transferred to the citizens of Mongolia. Privatization focused primarily on small-scale enterprises, such as internal trade and services, and livestock herding. The government prohibited privatization of large, state-owned enterprises, including roads and railways, the national airline, oil and gold mines, and large irrigation systems.

Agriculture

Nomadism and animal herding have been central facts in Mongolian life for thousands of years, and herding is still the country’s main economic activity. Mongolia has one of the world’s highest ratios of livestock to people. Animals raised include sheep, goats, cattle, horses, and camels. Agriculture plays a minor role in Mongolian economic life. Less than 1 percent of the land is farmable. Crops are grown in the northern part of the country, some with the help of irrigation, and irrigation has been extended into some parts of the Gobi. Principal crops include wheat, potatoes, barley, and oats. The production of hay and fodder for livestock feed is also important.
In the 1920s the government made a rash attempt to imitate Soviet collectivization, whereby individual herders were forcibly organized into state-controlled groups. The program resulted in a disastrous loss of livestock and was largely abandoned until the late 1950s. At that time, a specifically Mongolian form of collectivization was formed, resembling Chinese communes in that the territory of each herders’ association was also an administrative region, equivalent to a county. Also in the late 1950s the government created large state-owned farms and increased the land area under cultivation. In 1990 the government removed all restrictions on private livestock ownership. Subsequently, the herders’ associations and state farms were broken up into smaller units and privatized.

Mining and Manufacturing

Mining and industrial enterprises are concentrated in the north central part of the country. The mining of copper and molybdenum began with Soviet aid and expertise in the late 1970s near Erdenet. The copper mine became Mongolia’s largest source of foreign exchange in the 1990s. Mongolia’s rich iron ore deposits are located near Darhan. Black coal is mined near Ulaanbaatar and Darhan, providing both cities with their own energy source. A cement and lime complex is located between Darhan and Erdenet. Mongolia is also a major producer of fluorspar, which is used in making steel and industrial acid. Gold mining is also significant, and the exploitation of recently discovered deposits has attracted foreign investment. Petroleum deposits in eastern Mongolia began to be tapped in the late 1990s.

Ulaanbaatar and Darhan are the largest industrial centers. Mongolia produces building materials such as bricks; metal products, including steel sheet and copper concentrate; processed food and beverages, including vodka, beer, and soft drinks; and leather and woolen goods, including carpets and footwear. Many manufacturing enterprises that were not commercially viable went out of business in the 1990s.

Energy

In 2003 Mongolia produced 3 billion kilowatt-hours of electricity, all generated by thermal power plants burning coal. Major power stations are located at Ulaanbaatar, Darhan, Choybalsan, and Sühbaatar.

Currency and Foreign Trade

The country’s central bank is the Bank of Mongolia. Commercial banks also operate. The currency is the tugrik (tögrög), which consists of 100 möngö (1,165 tugriks equal U.S.$1; 2006 average).

Most of Mongolia’s trade was once with Soviet-bloc countries, but since the early 1990s the country has made efforts to expand its trade. Leading purchasers of exports are China, the United States, Russia, Singapore, and Australia; chief sources of imports are Russia, China, South Korea, Japan, and Germany. The principal exports are copper, cashmere, animal hides and furs, textiles, and gold. Imports consist mainly of machinery and transport equipment, mineral products (mostly refined petroleum), consumer goods, and industrial raw materials. In 2003 Mongolian imports were valued at $801 million and exports at $616 million.

Economy

Animal herding is the main economic activity and is practiced throughout the country. Manufacturing is devoted largely to the processing of agricultural and livestock products. Mining is also important, but most of the country’s mineral deposits remain unexploited. In 2006 the gross domestic product (GDP) was $3.13 billion, or about $1,211.90 per capita.

During the communist period from 1924 to 1990, the state controlled all industry and trade, through either direct ownership or cooperatives. The government of Mongolia followed the economic model of the USSR, implementing a series of five-year plans beginning in 1948. Mongolia received large-scale Soviet aid to help it increase industrial and agricultural production. The development focused primarily on the industrial sector, and new cities were built near several new mining centers in northern Mongolia.

In 1990 Mongolia began a process of economic reform to phase out the state-controlled economic system in favor of a market-oriented economy. That year a foreign investment law was enacted, making possible the participation of foreigners in a variety of businesses, ranging from firms wholly owned by foreigners to joint ventures with Mongolian enterprises. Many new laws pertaining to taxation, banking, and debt were passed.

In 1991 a privatization law went into effect, by which state-owned property and enterprises began to be transferred to the citizens of Mongolia. Privatization focused primarily on small-scale enterprises, such as internal trade and services, and livestock herding. The government prohibited privatization of large, state-owned enterprises, including roads and railways, the national airline, oil and gold mines, and large irrigation systems.