Overview

Mongolia has taken significant and consistent steps towards market economy. In 1997, Mongolia has joined the World Trade Organization (WTO). Despite some attempts at diversification of exports, the Mongolian economy remains highly vulnerable with external factors. Mongolia has narrow productive base that is built on animal originated raw materials such as hides, skins, dehaired cashmere etc. and mineral resources namely copper, gold and flour spar.

National GDP²²

National Statistical Office data for a year of 2001 shows that in the structure of GDP agriculture share remains predominant, which is represented as 48.9 percent of total labor force and produces nearly 30 percent of GDP. This constitutes 30% of exports having a strong comparative advantage. Mining and processing industry share is 8.5 per cent and 5.6 per cent respectively. Rest of GDP is produced by wholesale and retail trading and service sectors.

During the economic transition period from the centrally planed economy to the market based economy, the former trading system was completely destroyed. Liberalization of foreign trade activity in one hand and giving freedom in domestic trade in the other hand had completely changed structure of trade sector of the country.

Mongolia’s domestic trade sector is represented by over 100 wholesale trading private companies. One of the obstacles existing trade structure is an inadequate service condition for rural population, including people live in the provincial centers (aimag and sum centers). Nearly 95 per cent of consumer goods are imported or produced in city of Ulaanbaatar and accordingly distributed to the provinces through the retail channel. This inappropriate trade structure that can be so called one door outflow system raises vast problems with supply of provincial population by consumer goods in terms of article of goods, quality and price.

Mongolia’s import consists mainly from processed goods such as petroleum products, equipment, machinery and consumer goods. The import exceeds the export that contributes bad trade balance.