LOCAL ECONOMIC DEVELOPMENT DESK STUDY

LOCAL ECONOMIC DEVELOPMENT
DESK STUDY
FINAL REPORT
April 2008

MERCY CORPS MONGOLIA
BARUUN BUS REGIONAL ECONOMIC DEVELOPMENT PROJECT
BRIEF STATISTICAL SURVEY OF MACROECONOMIC INDICATORS
OF THE WESTERN REGION IN LINE
WITH ECONOMIC DEVELOPMENT AND GROWTH OF MONGOLIA
SURVEY CONDUCTED BY B. BATMUNKH, SHORT-TERM NATIONAL CONSULTANT
ULAANBAATAR
MARCH 2008

CONTENT
LIST OF TABLES ......................................................................................................................................
LIST OF PICTURES ...................................................................................................................................
ABBREVIATIONS .....................................................................................................................................
iii
iv
iv
FOREWORD ............................................................................................................................................. 1
1. BRIEF INTRODUCTION TO THE WESTERN REGION .......................................................................... 2
2. ECONOMIC DEVELOPMENT OF THE WESTERN REGION ................................................................... 4
2.1 Position and impact of the western region in the economy of Mongolia ............................... 4
2.2 Increase in inflation in the western region .............................................................................. 6
2.3 Population, workforce, and unemployment of the western region ......................................... 10
2.4 Financial resources and capacity of the western region ......................................................... 14
2.5 Comparative assessment of agricultural development of the western region ......................... 16
2.5.1 Comparative assessment of the western region’s animal husbandry development .......... 16
2.5.2 Comparative assessment of the western region’s crop production development ............. 17
2.6 Comparative assessment and development of non-agriculture sectors of the western region 18
2.6.1 The western region’s industrial sector .............................................................................. 18
2.6.2 The western region’s construction sector ......................................................................... 19
3. ASSESSMENT OF POVERTY LEVEL OF WESTERN REGION ............................................................... 19
4. THE GOVERNMENT’S POLICY ON ECONOMIC DEVELOPMENT ........................................................ 21
4.1 The Government’s policy on rural and regional development ............................................... 21
4.2 The Government’s policy on animal husbandry development ............................................... 24
4.3 The Government’s policy on crop production development .................................................. 25
4.4 The Government’s policy on industrial development ............................................................ 25
4.5 The Government’s policy on reduction of poverty and unemployment ................................. 27
5. DEVELOPMENT TRENDS AND OPPORTUNITIES FOR THE WESTERN REGION ................................... 28
5.1 Future trends of the economic development of the western region ........................................ 28
5.2 Opportunities of the development of the western region ........................................................ 30
6. CONCLUSIONS ................................................................................................................................ 31
7. SUGGESTIONS AND RECOMMENDATIONS ....................................................................................... 34
REFERENCE ............................................................................................................................................. 35
ANNEX I - UVS AIMAG GOVERNMENT SUPPORT FOR PRIVATE SECTOR DEVELOPMENT
ANNEX II - REGISTERED BUSINESSES IN UVS AIMAG
ANNEX III - HERDER HOUSEHOLDS IN UVS AIMAG .........................................................................

LIST OF TABLES
Table - 1.
The western region’s stance in the socio-economic development of
Mongolia as of 2006-2007 ........................................................................................... 4
Table - 2. GDP per capita, its growth by regions ......................................................................... 10
Table - 3. Net growth of GDP in 1999-2006 and regional contributions ..................................... 10
Table - 4. Economic sector structure by regions .......................................................................... 11
Table - 5. CPI increase for the western region aimags and Ulaanbaatar, 1996=100% ................ 16
Table - 6.
The western region’s population and its percentage in the total population
by regions ..................................................................................................................... 18
Table - 7. Economically active population and its percentage in the total population by regions 18
Table - 8. No. of employed, percentage in the country total by regions ...................................... 21
Table - 9. No. of registered unemployed, its percentage in the national total by regions ............ 22
Table - 10. Unemployment level by regions estimated on the registered unemployed .................. 22
Table - 11. Unemployment level calculated on census and sample survey results by regions ...... 23
Table - 12. Number of business entities by regions ....................................................................... 24
Table - 13. Regional treasury revenue, million MNT .................................................................... 22
Table - 14.
Grouping of aimags by percentage of subsidies received by the local
treasury from the state treasury, 2007 .......................................................................... 25
Table - 15. Added value of the agricultural sector by regions ....................................................... 25
Table - 16. No. of livestock, its percentage in the national total by regions .................................. 26
Table - 17. Harvested crops, its percentage in the national total by regions .................................. 26
Table - 18. Harvested potatoes, its percentage in the national total by regions ............................. 28
Table - 19. Harvested vegetables, its percentage in the national total by regions .......................... 30
Table - 20. Industrial goods sale, at current price by regions ......................................................... 31
Table - 21. Amount of construction works and major repair by regions ........................................ 31
Table - 22. Minimum living standard, MNT per capita per month by regions .............................. 34
Table - 23. Basic poverty indicators, by country total, urban and rural areas and regions ............ 35
iii

LIST OF PICTURES
Picture - 1. The western region of Mongolia .................................................................................. 3
Picture - 2. Percentage of regions in the GDP of Mongolia ........................................................... 7
Picture - 3. Inflation increase in the western region aimags and Ulaanbaatar, 1996=100 .............. 11
Picture - 4. Price of one kg of the first grade flour, MNT ............................................................. 12
Picture - 5. Price of one kg of muttion, MNT ................................................................................. 13
Picture - 6. Fuel price per liter, MNT ............................................................................................. 14
Picture - 7. Population growth and decrease, 1990=100 ................................................................ 15
Picture - 8. Migration to Ulaanbaatar, by regions, thousand people .............................................. 15
Picture - 9.
Percentage of the regional population in the national total population,
average of the projection, 2025 .................................................................................... 16
Picture - 10. GDP growth trend of the western region, dynamics of 1999-2006,
year-wise, million MNT ............................................................................................... 44
Picture - 11. GDP growth trend of the western region, dynamics of 2000-2006,
year-wise, million MNT ............................................................................................... 45
ABBREVIATIONS
SIK -
NSO -
GDP -
CPI -
State Ikh Khural
National Statistics Office
Gross Domestic Product
Consumer Price Index
iv

FOREWORD
The pressing issues of the socio-economic development of Mongolia are successful continuation of
the transition to the market economy ensuring high economic growth and reduction of widespread
poverty. The rural economic development is an important step to resolve these issues. With
expansion of business activities in rural areas, creation of new jobs, and increase in people’s
income, the economy will grow further ensuring favorable environment for increase in income and
decrease in poverty.
Although Mongolia has a vast territory, position of the rural areas in the economy is inadequate. As
of 2006 only 70% of the GDP of Mongolia was produced in Ulaanbaatar, Erdenet, and Darkhan and
just 30% was produced in other parts of the country. When looking at Mongolia apart from its
capital of Ulaanbaatar, Erdenet and Darkhan the picture is economically backward and biased. So
the migration of rural people to urban areas is on the increase due to stark difference in economic
development and social life between the urban and rural areas of Mongolia. As a result we see
further expansion of the ger districts, unparalleled high level of air pollution in the capital, severity
of housing supply, and increase in school intake and traffic jams among many other problems. The
widespread poverty remains in the rural areas due to weak economic growth.
So the issue of development of rural economy is a priority objective for the future economic
development of Mongolia. In other words, the rural economic development and progress will bring
opportunities to grow the economy and improve peoples’ livelihood.
The Swiss Agency for Development and Cooperation has developed a Swiss Cooperation Strategy
to be implemented from 2007 to 2012 with the purpose of assisting Mongolia in these fields. The
Western Regional Economic Development Project has commenced with the purpose of
implementing the outcome 3 of this strategy. As the poverty level is the highest in the western
aimags of Mongolia there is a dire need to improve economic capacity of the region’s rural
population. Key to the sustainable regional development will be creation of jobs in fields other than
animal husbandry and provide opportunities for income generation in the rural areas. Under the
project a brief statistical survey comparing the western region’s macroeconomic indices with the
economic development and growth of Mongolia will be undertaken in the first phase and afterwards
economic opportunities and resources in Uvs aimag will be determined with active participation of
its community. This document presented for you is the outcome of the brief statistical survey
comparing the western region’s macroeconomic indices with the economic development and
growth of Mongolia.
Although the Government of Mongolia had been developing and implementing policies and
programs on regionalized development of the rural areas, reduction of poverty and unemployment,
and development of animal husbandry and crop production. Unfortunately, the survey results have
testified that its implementation was feeble and failed to achieve expected outcome. The main
reason for failure of the program implementation is no funding has been set aside every year.
Particularly though local governments demand its implementation it fails to earmark required
finances and plans to use local treasury funds and foreign aids. But in reality those funds are not
enough.
We note here that due to some limited statistical data only last few years have been taken into
account and we were unable to make comparisons because some indices were unavailable for
regions and aimags. As the NSO didn’t made GDP calculations before 1999 our survey has been
restricted to years only from 1999 to 2006 for the GDP data. Also as the GDP for the aimags have
been estimated for the current years its growth has been calculated not at comparative prices but at
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the current year price. As the amount of selection for the random survey of poverty and workforce
conducted by the NSO was small the survey results have been produced for the regions and not
aimags. Consequently we were unable to produce the poverty levels for the aimags of the regions.
1. BRIEF INTRODUCTION TO THE WESTERN REGION
As stated in the regional development policy of Mongolia the western region comprises of 5 aimags
- Bayan-Ulgii, Uvs, Khovd, Govi-Altai and Zavkhan. The western region makes up 26.6% of the
country’s territory and occupies 415.3 thousand square kms. The western region is the remotest area
from the capital.
Picture - 1.
The western region of Mongolia
For example, Bayan-Ulgii aimag center is 1709 km far from the capital city of Ulaanbaatar, Khovd
aimag center is 1487 km, Uvs is 1417 km, and Govi-Altai is 1037 km respectively. The western
region is 800-3500 m above the sea level and 353.9 km 2 of its territory is pasture and 1.12 km 2 is
used for crop production, and 96,1 km 2 is under special protection. 59% of lakes and rivers of our
country, 29% of its water and 21% of forest reserves goes to the western region.
As of the end of 2006 15,8% of the population of the country or 417,100 resided in the region
which boasts of its most multi-ethnic society in Mongolia.
The economic development level is relatively lower than that of other regions. As of 2006 GDP per
capita was MNT 634.4 thousand which was 2.7 times less than that of other regions making 12%
and almost twice as low the country average becoming the least developed economically. As of
2006 agriculture accounted for 61.0% of the western region’s GDP, services for 38.4%, and
industrial and construction sectors for only 0.6%.
Table - 1. The western region’s role in socio-economic development of Mongolia as of 2006-
2007
Main indicators
Country
total
Western
region
Uvs
aimag
Share of
western
region in
Share of
Uvs in the
western
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1. Territory, thousand sq. km
2. Population, thousand, 2007 end
3. No. of employed, 2006 end
4. GDP, billion MNT, 2006
5. GDP per capita, 2006, thousand MNT
6. No. of livestock, 2007 end
7. Industrial goods sale, million MNT, 2006
8. No. of operating business entities, 2007
end
9. Crops, 2006, tons
- Cereal
- Potato
- Vegetables
10. Land lines, 2007 end
11. No. of vehicles, 2007
12. No. of secondary schools, 2007/2008
school year
13. No. of pupils of secondary school,
2007/2008 school year, thousand
14. No. of doctors as of 2006
1564.1
2635.1
1009.9
3172.4
1222.6
40,263.8
2,602,935.4
32,105
114,778.2
114,490.4
76,497.5
149,973
161,989
537.5
7079
96.8
607
20.8
127
Source: Statistical Yearbook of Mongolia, 2006, Statistical Bulletin, NSO, 2007.
754
415.3
417.1
167.6
260.1
634.4
12301.7
15653.7
2823
3325.5
18513.1
13893.3
11951
16142
154
69.6
81.9
32.5
68.4
849.7
2653.5
4906.7
513
2157.7
1960.4
1498.2
2280
2697
27
the country
average
26.6
15.8
16.6
8.2
-
30.6
0.6
8.8
2.9
16.2
18.2
8.0
9.5
20.4
18.0
8.6
region total
16.7
19.6
19.4
26.3
-
21.6
31.3
18.3
64.9
10.6
10.8
19.1
16.7
17.5
21.5
20.9
The percentage of agriculture in the economy is relatively high and share of industry is too little
which is main difference from that of other regions.
Table - 1 shows the role of the western region in the socio-economic and infrastructure
development of Mongolia. For example, you can see that it is lagging behind in terms of industrial
goods and crop production. Also one can see that it is behind in terms of number of landlines,
vehicles, and doctors and operating business entities.
Strengths of the western regions are its scenic natural beauty, wild animals, wide territory with plant
species; ample reserve of agricultural land, pasture based animal husbandry adapted to the nature,
mineral resources, relatively high level of education of its population, hard working quality,
opportunity to use market opportunity of neighboring countries, and opportunity to produce natural
products. The western region has advantages over the other regions in terms of land resources.
Its weaknesses include economic weakness, weak development of infrastructure, import of
electricity from Russia for Bayan-Ulgii, Uvs and Khovd aimags, absence of railway, no other roads
than improved local one, remoteness from the capital and relatively developed regions, low share
in the estimated state mineral reserves, extreme climate, dependence of animal husbandry and crop
production on the environment.
Uvs aimag plays a crucial role in economic development of the western region. This project aimed
at economic development of the western region will investigate local economic development
opportunities and capacity basing on Uvs aimag with a participatory method. Uvs aimag has
territory of 69.6 thousand sq. km and accounts for 4.4% of our country area. 60% of the territory is
steppe and 40% is Gobi. It has mixed landscape of steppe, desert and high mountains. It is rich in
coal resources and has around 10 open pit mines such as Nuurst Khotgor, Khuden, Khar Tarvagatai,
Yavar, and Shurgadag. One of the natural resources of the aimag is salt. There are some 30 salt
deposits in the aimag and one of them Shuden Uul deposit having stone salt is the only natural
resource in Mongolia ready for use. Also there are occurrences of gold, platinum, silver, copper,
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molybdenum, uranium, crystal, and persimmon. It is the top aimag in Mongolia in the cultivation of
sea-buckthorn.
As of the end of 2007, 81.9 thousand people equal to 3.1% of the country’s population resided in
the aimag. It has 19 soums and 90 baghs. Uvs aimag produced 2.2% of the country’s GDP in 2006.
The fact that the GDP per capita came to 617.5 thousand MNT in 2006 is twice as low the country
average and 2.7% lower than the western region average (See Table-2). The agricultural sector
accounts for 68.4% of the aimag GDP, service 31.2%, industrial and construction sectors for 0.4%
respectively (See Table-4).
Uvs aimag plays an important role in the western region’s economy and for 2006 the aimag
produced 26.3% of the GDP of the western region (See Table-1). This percentage was 20.7% in
1999 which showed that the contribution of this aimag in the regional economy has increased
considerably.
2. ECONOMIC DEVELOPMENT OF THE WESTERN REGION’S
2.1 Position and impact of the western region in the economy of Mongolia
Though the western region accounts for more than one fourth of the country’s territory and for
about 16% of its population, as of 2006 only 8.2% of the GDP went to the region. This percentage
has decreased substantially compared to 1999 as shown in Picture-1. The position of the western
region in the economy of Mongolia has been decreasing for the last seven years.
But we need to take into account that the number of aimags that make up region is not the same. For
example, as the eastern region consists of Dornod, Sukhbaatar and Khentii aimags, its GDP is just
5%. On the other hand, the difference in the GDP share of the regions is due to many factors such as
economic development level, sectoral structure, infrastructure development, population density, and
proximity to central markets. For instance, the Khangai region includes Orkhon aimag where there
is a large copper mine of Erdenet that plays an important role in the country’s economy. Thus, the
Khangai regions accounts for 23% of the GDP.
Picture-2.
Percentage of regions in the GDP of Mongolia
1999
2006
11%
8%
23%
47%
6%
15%
21%
54%
5%
10%
Western region Khangai region Central region
Eastern region Ulaanbaatar
Source: Statistical Yearbook of Mongolia, 2006, Statistical Bulletin, NSO, 2007.
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You can see that the economic development level of the western region is lower than that of the
other four regions. As of 2006 GDP per capita for the western region was twice as low the country
average as we noted earlier.
As the NSO didn’t calculate the aimags’ GDP on comparative prices, its growth was estimated on
current prices in the below table and appears very high. But it is significant as it gives us
opportunity to compare speed of the GDP growth by the regions and aimags.
Table-2.
GDP per capita, its growth by regions
2006 GDP per capita, 2006
GDP, billion MNT
Regions
% thousand MNT %
1999 2006 2000 1999 2006 2000
Western 103.3 260.1 251.8 245.0 634.4 258.9
Uvs 21.1 59.8 283.4 242.8 677.8 279.2
Khovd 17.2 65.4 380.2 191.8 653.6 340.8
Bayan-Ulgii 26.2 51.6 196.9 285.1 642.2 225.3
Zavkhan 17.4 33.6 193.1 268.9 556.0 206.8
Govi-Altai 21.1 59.8 283.4 242.8 677.8 279.2
Khangai 197.5 724.2 366.7 361.9 1307.7 361.3
Central 136.2 315.0 231.3 306.9 721.6 235.1
Eastern 57.9 143.2 247.3 285.9 715.3 250.2
Ulaanbaatar 430.9 1 730.0 401.5 566.9 1739.9 306.9
TOTAL 925.8 3 172.4 342.7 390.1 1222.6 313.4
Source: Statistical Yearbook of Mongolia, 2006, Comprehensive Calculation of GDP by the NSO for 1999-2000.
It is clear from the table that the speed of the regions’ economic growth is different. For example,
the western region’s GDP increased 2.6 times between 1999 and 2006 which placed it behind
Ulaanbaatar and the Khangai region in the growth pace. Given 3.4 times increase in the GDP on the
country average during the same period, it shows that the economic growth of the western region
was as sluggish as that of the central and eastern regions. But taking into account the aimags of the
region, Bayan-Ulgii aimag’s GDP grew fastest at 3.8 times followed by Uvs at 3.2 times in the last
7 years. But the economic development speed in Govi-Altai was the lowest and its GDP grew 1.9
times for the same period. As a result of the high economic growth in the two aimags above,
Zavkhan aimag the first in amount of the GDP in the region in 1999 reversed to the third in 2006.
But Bayan-Ulgii aimag that took the last place in 1999 for its GDP amount came to the top in 2006.
Thus, we observe irregular economic development growth in the region.
The speed of the GDP growth per capita was lower than that of Ulaanbaatar and the Khangai region
for the same period and higher than that of the central and eastern regions. In 1999 Zavkhan and
Govi-Altai were the leaders in terms of the GDP per capita whereas in 2006 Khovd and Bayan-
Ulgii took the lead.
Table-3 shows what impact the western region had on the economic growth of Mongolia between
1999 and 2006.
Table-3.
Net growth of GDP in 1999-2006 and regional contributions
Regions
GDP, billion MNT
1999 2006
Difference in net
growth,
billion MNT
Percentage in the
net growth
Western 103.3 260.1 156.8 7.0
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Khangain 197.5 724.2 526.7 23.4
Central 136.2 315.0 178.8 8.0
Eastern 57.9 143.2 85.3 3.8
Ulaanbaatar 430.9 1 730.0 1 299.1 57.8
TOTAL 925.8 3 172.4 2 246.6 100.0
Source: Statistical Yearbook of Mongolia, 2006, Comprehensive Calculation of GDP by the NSO for 1999-2000.
Table-3 shows that between 1999 and 2006 the GDP of Mongolia increased by MNT 2,246.6
billion of which 7.3% or MNT 156.8 billion went to the western region. Ulaanbaatar accounted for
60.3% of the economic growth of Mongolia and the Khangai region for 24.5% (chunk of it was by
Erdenet copper mine).
One can see that there has been considerable positive change in the economic structure of the
western region in Table-4. In 1999 agriculture accounted for 81% of the region’s economy whereas
in 2006 it decreased to 61% i.e. down by 20 points and the service sector increased by the same
percent.
Table-4.
Economic sector structure by regions
1999 2006
Percentage in the total, % Percent
% of the total
Regions
age in
Total
Industry &
Agriculture
Service the
Industry &
Agriculture
Service
construction
total, %
construction
Western 100 80.8 1.6 17.6 100 61.0 0.6 38.4
Uvs 100 81.9 2.3 15.8 100 68.4 0.4 31.2
Khovd 100 80.2 2.6 17.2 100 67.6 7.7 24.7
Bayan-Ulgii 100 72.6 1.9 25.5 100 40.1 3.7 56.2
Zavkhan 100 85.3 0.1 14.6 100 64.6 - 3.3 38.8
Govi-Altai 100 81.9 -1.4 19.5 100 73.1 - 11.3 38.1
Khangai 100 55.1 23.4 21.6 100 26.9 69.0 4.1
Central 100 61.4 15.3 23.3 100 45.4 28.4 26.2
Eastern 100 75.7 8.2 16.1 100 61.6 12.2 26.2
Ulaanbaatar 100 1.5 27.5 71.0 100 0.6 39.0 60.4
TOTAL 100 37.0 20.7 42.3 100 18.8 40.4 40.8
Source: Statistical Yearbook of Mongolia, 2006, Comprehensive Calculation of GDP by the NSO for 1999-2000
But share of the industry and construction sector decreased from 1.6% to 0.6%. This was due to
much loss incurred by the power plants in Zavkhan and Gobi Altai. This structural change is due to
decrease in agricultural, industrial, and construction sectors and increase in trade and service.
2.2 Increase in inflation in the western region
Inflation is measured with consumer price index (CPI) in Mongolia like in other countries. The CPI
shows how prices change on average when types and quality of goods and services purchased by
consumers remain the same. In order to measure the CPI random consumer price survey is held.
The NSO started to calculate the CPI using data collected through random survey and the
International Monetary Fund methodology from September 1991. This index was measured
monthly collecting prices of 123 items of goods and services from 1991 to 1995 and those of 205
items of goods and services from 1996 to 2005 through random survey using Las-peyres index.
Since 2001 types of the national consumer basket of goods and services was increased to 239.
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But from 1997 they began to measure the CPI collecting prices of 116 types of goods and services
in aimag centers. From 2001 the types of the aimag consumer goods and services were increased to
139. As the CPI is not measured by regions the following table shows the CPI increase for
Ulaanbaatar and 5 western region aimags for the years from 1997 to 2006. The CPI of Ulaanbaatar
represents the country average index.
Table - 5. CPI increase for the western region aimags and Ulaanbaatar, 1996=100%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Bayan-Ulgii 100 103.1 93.3 103.2 102.4 110.9 104.9 118.2 136.5 145.5 161.1 196.7
Govi-Altai 100 122.8 125.6 135.4 137.6 141.2 142.3 165.4 188.1 210.1 231.7 287.1
Zavkhan 100 109.7 108.6 110.4 119.6 127.6 124.8 135.3 146.7 152.3 165.9 203.1
Uvs 100 122.0 121.4 131.2 130.8 134.8 130.9 144.5 159.5 174.5 193.2 232.2
Khovd 100 118.7 113.7 133.8 144.2 152.0 148.0 154.4 187.9 206.3 232.3 289.4
Ulaanbaatar 100 120.5 127.7 140.5 151.9 164.0 166.7 174.5 193.7 212.1 224.8 258.7
The table shows the inflation increase has been different in the western region aimags compared to
1996. The indices of this table are more clearly illustrated in Picture-3. As we look at the table and
the picture the increase in inflation was more in Ulaanbaatar until 2006. The picture shows that the
inflation increase was relatively low in Bayan-Ulgii and Zavkhan aimags of the region but higher in
Govi-Altai and Khovd aimags. But the consumer goods and service price in Khovd aimag went up
rapidly from 2002 and did so from 2003 in Govi-Altai. It is striking that the prices were more than
that of the country average in 2006 and 2007.
Picture-3. Inflation increase in the western region aimags and Ulaanbaatar, 1996=100
290
250
210
Percent
170
130
90
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Year
Bayan-Ulgii Govi-Altai Zavkhan
Uvs Khovd Ulaanbaatar
As we look at Table-3 the CPI increase of Ulaanbaatar was 258,7% between 1996 and 2007
whereas it reached 289.4% in Khovd aimag and 287.1% in Govi-Altai aimag. For the western
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aimags price increase of the consumer goods and services depends on the amount of consumer
goods transported from Ulaanbaatar. The remoteness and transportation costs have much to
influence. It is cheaper for the western aimags to purchase goods from over the border. So it is
justified that there is less inflation increase in aimags near to Ulaanbaatar and meet its needs
through border trade and local production.
We demonstrate how prices of certain commodities increased in Ulaanbaatar and the western region
aimags in the following pictures. As the statistical yearbook for 2007 has not been published yet
and data on prices of certain commodities of the aimags for 2007 were unavailable, the prices are
shown for the years from 1997 to 2006.
Picture-4.
Price of one kg of the first grade flour, MNT
550
500
450
400
MNT
350
300
250
200
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Year
Bayan-Ulgii Govi-Altai Zavkhan Uvs Khovd Ulaanbaatar
The table shows that the flour price fluctuated considerably in the western region aimags. The price
of one kg of flour had been relatively low in Bayan-Ulgii, Khovd and Uvs aimags whereas it was
higher in Govi-Altai, Zavkhan and Ulaanbaatar. Specially from 2004 the price of flour went up
rapidly in Govi-Altai aimag. The low price in Bayan-Ulgii, Khovd and Uvs aimags is because to
some extent its residents grow wheat, produce flour on their own and the locally produced flour is
cheap.
We see the trend that the price of one kg of mutton has been the highest in Ulaanbaatar and
relatively low in Govi-Altai and Uvs aimags. But the general trend of the mutton price increase is
omnipresent in any aimag for example, in 2002 the mutton price declined in all these aimags. This
is due to the extreme cold weather in winter and droughts in summer of 2001 and 2002 and herders
slaughtered their animals in large numbers increasing meat supply to the market. But from 2003 the
meat price has been on the increase steadily.
Picture-5.
Price of one kg of muttion, MNT
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2300
2100
1900
1700
1500
MNT
1300
1100
900
700
500
300
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Year
Bayan-Ulgii Govi-Altai Zavkhan Uvs Khovd Ulaanbaatar
For the remote aimags of the western region fuel prices have important impact on production and
services costs. As we look at Picture-5 the fuel price increase has less fluctuations compared with
those of other commodities. The price was different in Ulaanbaatar and the western aimags before
2003, but the difference has decreased. The fuel price has been going up since 2003 nationwide and
it has been slightly higher in Govi-Altai and Uvs aimags than in other aimags.
Picture-6.
Fuel price per liter, MNT
900
800
700
600
MNT
500
400
300
200
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Bayan-Ulgii Govi-Altai Zavkhan Uvs Khovd Ulaanbaatar
Year
- 9 -

2.3 Population, workforce, and unemployment of the western region
Its population of 417.1 thousand as of the end of 2007 accounts for 15,8% of the country’s
population. But this percentage was 19,8% in 1990 and decreased due to the migration as you can
see.
Table-6. The western region’s population and its percentage in the total population by
regions
1990 1995 2000 2007
2007
Regions Thousand
people
% of
total
Thousand
people
% of
total
Thousand
people
% of
total
Thousand
people
% of
total
%
1990
Western 426.20 19.8 423.0 19.0 420.0 17.4 417.1 15.8 97.9
Uvs 88.8 4.1 95.9 4.3 86.8 3.6 81.9 3.1 92.2
Khovd 81.4 3.8 84.8 3.8 87.8 3.6 90.1 3.4 110.7
Bayan-Ulgii 99.1 4.6 79.8 3.6 94.6 3.9 102.1 3.9 103.0
Zavkhan 92.2 4.3 95.9 4.3 87.2 3.6 81.7 3.1 88.6
Govi-Altai 64.7 3.0 66.6 3.0 63.6 2.6 61.3 2.3 94.7
Khangain 491.10 22.8 531.2 23.8 554.2 23.0 561.6 21.3 114.4
Central 437.30 20.3 424.7 19.0 445.3 18.5 441.6 16.8 101.0
Eastern 212.60 9.9 209.1 9.4 201.5 8.4 202.8 7.7 95.4
Ulaanbaatar 586.20 27.2 642.0 28.8 786.5 32.7 1011.9 38.4 172.6
TOTAL 2153.4 100.0 2230.0 100.0 2407.5 100.0 2635.1 100.0 122.4
Source: Statistical Yearbook of Mongolia, 1992, 2000, 2006, Statistical Bulletin, NSO, 2007
In 1990 there were 9.1 thousand more people than the present population of the region. The Khovd
aimag population increased by 10.7%, that of Bayan-Ulgii by 3% whereas the population of
Zavkhan aimag decreased by 11.4%, that of Uvs aimag by 7.8% and that of Govi-Altai by 6.3%
respectively between 1990 and 2007.
Given Picture-3, its population decreased by 2.1% at the end of 2007 compared to 1990. But the
country average rose by 22.4% than that of 1990. It shows that Uvs aimag population decreased
even more.
Picture-5. Population growth and decrease, 1990=100
Per cent
125
120
115
110
105
100
95
90
111.8
108.0
103.5
100
99.2 98.5 97.7
122.4
116.3
97.3 97.9
92.2 92.2
85
80
1990 1995 2000 2003 2007
Year
Country total Western region Uvs aimag
Source: Statistical Yearbook of Mongolia, 1992, 2000, 2006, Statistical Bulletin, NSO, 2007
- 10 -

Decrease in the population of the western region in the last 17 years is because of increase in the
migration to Ulaanbaatar.
Picture-8.
Migration to Ulaanbaatar, by regions, thousand people
Western
88.6
Khangai
UB
Eastern
29.9
78.6
Central
68.0
Source: Population and Housing Census Results of 2000
In total 88.6 thousand people have migrated from the western region to Ulaanbaatar since 2000 and
it has become a hub to ensure mechanic growth of the Ulaanbaatar population and is set to continue
to do so. Given results of the Population and Housing Census of 2000, 35.4% or MNT 269.0
thousand of MNT 760.1 thousand people who lived in Ulaanbaatar in 2000 were those who came
from other regions in different periods of time and 64.6% or 491.1 thousand were native residents
of the city.
Picture-9.
Percentage of the regional population in the national total population,
average of the future calculation, 2025
Western
12.6%
Ulaanbaatar
42.9%
Khangai
20.4%
6.3%
17.9%
Eastern
Central
Source: Future Estimation of Population, NSO, 2002
- 11 -

Looking at the future estimation of the population done by the NSO in 2002 on the results of the
population and housing census of 2000, percentage of the western region in the country total will
reach 12.6% in 2025 and tends to decrease from 15.8% of 2007. This will affect the economic
development of the western region negatively in future.
As of the end of 2006 176,000 people equal to 16.9% of the economically active population of the
country resided in the region. 15.8% of the total population lived in the region whereas it has more
share for workforce. But the workforce declined compared to 1992 like the population did which
was again due to the migration. But since 1992 the number of workforce of Khovd and Bayan-Ulgii
1992 has increased.
Table-7. Economically active population and its percentage in the total population by
regions
1992 1995 2000 2006
2007
Regions Thousand
people
% of
total
Thousand
people
% of
total
Thousand
people
% of
total
Thousand
people
% of
total
%
1990
Western 177.5 20.6 171.3 21.1 170.0 20.1 176.0 16.9 99.2
Uvs 40.1 4.7 36.1 4.4 34.3 4.0 34.4 3.3 85.8
Khovd 34.0 4.0 34.6 4.3 34.2 4.0 37.6 3.6 110.6
Bayan-Ulgii 32.9 3.8 26.0 3.2 30.4 3.6 34.8 3.3 105.8
Zavkhan 41.6 4.8 44.9 5.5 40.2 4.7 37.9 3.6 91.1
Govi-Altai 28.9 3.4 29.7 3.7 30.9 3.6 31.3 3.0 108.3
Khangai 210.2 24.4 215.0 26.5 229.4 27.1 246.0 23.6 117.0
Central 172.9 20.1 155.5 19.1 158.6 18.7 180.3 17.3 104.3
Eastern 84.7 9.8 77.2 9.5 67.9 8.0 75.0 7.2 88.5
Ulaanbaatar 214.7 25.0 193.7 23.8 221.7 26.2 365.5 35.0 170.2
TOTAL 860 100.0 812.7 100.0 847.6 100.0 1042.8 100.0 121.3
Source: Statistical Yearbook of Mongolia, 1992, 2000, 2006, Statistical Bulletin, NSO, 2007
As of the end of 2006 167.6 thousand people were employed in the region which accounts for
16.6% of the total number of employed.
Though the number of employed grew by only 4.7% between 1992 and 2006, percentage in the
country total declined by 19.9% compared to 1992.
The number of employed in Bayan-Ulgii, Khovd, and Govi-Altai aimags has increased between
1992 and 2007 but that of Uvs and Zavkhan aimags have decreased substantially.
Table-8. Number of employed, percentage in the country total by regions
1992 2000 2006
2006
Regions Thousand
Thousand
Thousand
%
% of total
% of total
% of total
people
people
people
2000
Western 160.1 19.9 160.1 19.8 167.6 16.6 104.7
Uvs 35.1 4.4 32.7 4.0 32.5 3.2 92.6
Khovd 32.6 4.0 32.4 4.0 36.1 3.6 110.7
Bayan-Ulgii 26.7 3.3 29.1 3.6 32.6 3.2 122.1
Zavkhan 38.8 4.8 37.4 4.6 36.2 3.6 93.3
Govi-Altai 26.9 3.3 28.5 3.5 30.2 3.0 112.3
Khangain 196.9 24.4 218.9 27.1 234.9 23.3 119.3
Central 164.5 20.4 151.8 18.8 175.9 17.4 106.9
Eastern 78.2 9.7 62.7 7.8 72.1 7.1 92.2
Ulaanbaatar 206.3 25.6 215.5 26.6 359.4 35.6 174.2
TOTAL 806 100.0 809.0 100.0 1 009.9 100.0 125.3
Source: Statistical Yearbook of Mongolia, 1992, 2000, 2006, Statistical Bulletin, NSO, 2007
- 12 -

The population of the western region especially population of employable age has been migrating to
Ulaanbaatar and the central region thereby decreasing its workforce.
Before comparing the regions on unemployment level, it is worthy to note here that there are two
different versions of official unemployment figures having stark difference and computed with
different methods. The number of the unemployed issued by the NSO monthly is the figure
registered with the employment office and the local administration and reviewed every three
months. But there are thousands of people who don’t register with these offices. Table-11 shows the
number of unemployed that is registered.
Table-9.
Number of registered unemployed, its percentage in the national total by regions
1992 2000 2007
2007
Regions Thousand
Thousand
Thousand
%
Per cent
Per cent
Per cent
people
people
people
1992
Western 17 486 32.4 9 943 25.8 5 958 19.9 34.1
Uvs 5 038 9.3 1 576 4.1 880 2.9 17.5
Khovd 1 360 2.5 1 880 4.9 790 2.6 58.0
Bayan-Ulgii 6 236 11.5 1 313 3.4 1 841 6.1 29.5
Zavkhan 2 861 5.3 2 829 7.3 1 419 4.7 49.6
Govi-Altai 1 991 3.7 2 345 6.1 1 028 3.4 51.6
Khangain 13 273 24.6 10 387 26.9 10 660 35.6 80.3
Central 8 410 15.6 6 822 17.7 4 161 13.9 49.5
Eastern 6 468 112.0 5 270 13.7 2 622 8.8 40.5
Ulaanbaatar 8 405 115.6 6 148 15.9 6 544 21.9 77.9
TOTAL 54042 100.0 38570 100.0 29945 100.0 55.4
Source: Statistical Yearbook of Mongolia, 1992, 2000, 2006, Statistical Bulletin, NSO, 2007
Table-10 shows the unemployment level calculated for registered unemployed. The unemployment
level in the western region is highest than the country average and other regions for 2006.
Table-10. Unemployment level by regions estimated on the registered unemployed
Regions 1992 1995 2000 2006
Western 9.8 6.0 5.8 4.8
Uvs 12.5 2.6 4.6 5.5
Khovd 4.0 5.4 5.5 4.0
Bayan-Ulgii 18.9 10.1 4.3 6.4
Zavkhan 6.9 4.7 7.0 4.5
Govi-Altai 6.9 9.4 7.6 3.4
Khangain 6.3 5.6 4.5 4.5
Central 4.9 4.9 4.3 2.4
Eastern 9.2 12.7 6.6 3.9
Ulaanbaatar 4.7 5.5 2.7 1.7
TOTAL 6.3 5.5 4.6 3.2
Source: Statistical Yearbook of Mongolia, 1992, 2000, 2006,
The unemployment level is comparatively high in Uvs aimag.
More realistic view of the unemployment has been given in the population and housing census of
2000 and the sample survey of workforce in 2003 as it used common international standards and
definitions.
- 13 -

According to the 2000 population and housing census results, the real unemployment level
accounted for 17% of the workforce and was 14.2% according to the sample survey of the
workforce. But the unemployment level estimated on the registered unemployed and produced with
administrative information we saw before was only 4.6% in 2000 as the country total and 3.5% in
2003.
As we look at Table-11, the general unemployment level in the western region is much lower than
that of other regions according to the 2003 survey.
Table–11. Unemployment level calculated on the census and sample survey results by regions
Regions 2000* 2003**
Western 14.7 10.8
Uvs 14.7 -
Khovd 11.6 -
Bayan-Ulgii 20.0 -
Zavkhan 15.4 -
Govi-Altai 11.1 -
Khangain 13.9 13.7
Central 18.2 18.2
Eastern 22.7 18.4
Ulaanbaatar 20.2 12.5
TOTAL 17.5 14.2
Uvs 14.7 -
Source: * Results of the 2000 Population and Housing Census
** Workforce Sample Survey Report, 2004.
2.4 Financial resources and capacity of the western region
In order to determine its financial capacity, we have considered the number of business entities in
operation and ability of the local government to cover its expenses with revenues. First of all, it is
understandable that the financial capacity will be expressed in the number of business entities and
their financial capacity.
Table-12. Number of business entities by regions
Regions
No.
1998 2000 2003 2007
% in the % in the % in the
country No. country No. country No.
total
total
total
- 14 -
% in the
country
total
2006/2000
%
Western 2694 14.2 2629 12.5 2 862 9.1 3 552 6.4 131.8
Uvs 473 2.5 513 2.4 628 2.0 640 1.1 135.3
Khovd 695 3.7 618 2.9 652 2.1 907 1.6 130.5
Bayan-Ulgii 468 2.5 448 2.1 521 1.7 719 1.3 153.6
Zavkhan 582 3.1 558 2.6 542 1.7 725 1.3 124.6
Govi-Altai 476 2.5 492 2.3 519 1.6 561 1.0 117.9
Khangain 3078 16.2 3159 15.0 3 570 11.3 5 117 9.2 166.2
Central 3968 20.9 4200 19.9 4 710 15.0 6 938 12.4 174.8
Eastern 1314 6.9 1382 6.6 1 361 4.3 1 952 3.5 148.6
Ulaanbaatar 7896 41.7 9715 46.1 18 975 60.3 38 342 68.6 485.6
TOTAL 18950 100.0 21085 100.0 31 478 100.0 55 901 100.0 295.0
Source: Statistical Yearbook of Mongolia, 2000 & 2006.

Table-12 shows that the western region accounted for only 6.4% of the total number of business
entities countrywide, but this figure decreased twice the 14.2% in 1998 strikingly. Between 1998
and 2006 the number of business entities in the region increased by 31.8% revealing that business
didn’t develop that much compared to the country average and other regions.
As we look at the local treasury by regions, the western region accounted for 11% of the country
total and it decreased slightly compared to 13.9% of 1990. Though increase in the western region’s
treasury was higher than that of the eastern region, it was much lower than that of the other regions
and the country average as shown in Table-13.
Table-13. Regional treasury revenue, by region, million MNT
Regions 1990 1995 2000 2003 2007 2007/1990
Western 392.5 2 224.1 4 025.0 5 117.5 16862.8 43 times
Uvs 77.4 488.4 931.0 1 281.6 3447.6 44.5 times
Khovd 58.3 392.0 883.9 970.8 3481.8 59.7 times
Bayan-Ulgii 111.5 460.2 719.3 887.5 2816.8 25.3 times
Zavkhan 76.7 506.8 906.2 974.2 3544.6 46.2 times
Govi-Altai 68.6 376.7 584.6 1 003.4 3571.9 52.1 times
Khangain 562.8 4 825.4 9 807.0 10 171.6 42564.8 75.6 times
Central 641.4 7 118.9 14 762.8 7 846.0 30132.9 47 times
Eastern 256.6 1 836.2 2 771.8 2 792.6 10146.3 39.5 times
Ulaanbaatar 970.2 15 326.8 36 145.5 26 385.0 52369.2 54 times
TOTAL 2823.5 31331.4 67512.10 52 312.8 152076.0 53.9 times
Source: Statistical Yearbook of Mongolia, 1992, 2000, 2006, Statistical Bulletin, NSO, 2007
As for our country the local governments receive subsidy from the state treasury and certain
percentage of the VAT revenue. One important indicator to show local government’s financial
standing is ability to cover its expenses with its revenues without resorting subsidies. As of 2007
Dornogovi, Umnugovi, Selenge, Darkhan-Uul, Orkhon and Ulaanbaatar didn’t receive subsidies
from the state treasury. Table-13 shows groups of the aimag according to percentages of this grant
taken from the state treasury in the total local treasury revenue.
Table-14. Grouping of aimags by percentage of subsidies received by the local governments
from the state treasury, 2007
Groups of percentages of the state subsidy
in the total local treasury
Aimags that fall in the groups and percentages of subsidy in
the total local treasury revenue
Up to 15 Bayan-Ulgii - 5.3, Bulgan - 6.9, Central - 13.6
15- 30 Sukhbaatar - 16.0, Dornod - 31, Uvurkhangai - 25.7
31- 45 Bayankhongor - 37.2, Khentii - 40.4, Arkhangai - 44.3
46- 55 Khuvsgul - 47.7, Dundgovi - 55.8
Above 56 Govi-Sumber - 58.1, Khovd - 59.6, Govi-Altai - 60.3, Uvs -
64.4, Zavkhan - 65.4
Source: Statistical Yearbook of Mongolia, NSO, 2007.
Table-14 shows that Zavkhan, Govi-Altai, Uvs, and Khovd in the western region completed 59,6%–
65,4% of its treasury revenue with subsidies from the state treasury and were unable to cover its
expenses with revenues. These figures reveal weak financial capacity of the region as a whole. But
Bayan-Ulgii aimag received less financial subsidies from the state in 2007 and generated its
treasury on its own (by 94.7%).
- 15 -

2.5 Comparative assessment of agricultural development of the western region
As of 2006 the western region accounted for 26.7% of the net agricultural produce of the country
which was an increase compared to that of 1999.
Table-15. Added value of the agricultural sector by regions
1999 2006
2006
Regions Agriculture,
billion MNT
Percentage
of the total
Agriculture,
billion MNT
Percentage
of the total
%
1999
Western 83.6 25.6 158,6 26.7 189.7
Uvs 17.5 5.4 34.1 5.7 194.9
Khovd 16.9 5.2 40.4 6.8 239.1
Bayan-Ulgii 12.5 3.8 26.2 4.4 209.6
Zavkhan 22.4 6.9 33.3 5.6 148.7
Govi-Altai 14.2 4.4 24.8 4.2 174.6
Khangai 108.8 33.3 194.8 32.7 179.0
Central 83.6 25.6 143.0 24.0 171.1
Eastern 43.8 13.4 88.2 14.8 201.4
Ulaanbaatar 6.5 2.0 10.4 1.7 160.0
TOTAL 326.3 100.0 595.0 100.0 182.3
Source: Statistical Yearbook of Mongolia, NSO, 2006. Comprehensive Calculation of GDP by the NSO for 1999-
2000
It shows that this region has an important position in the agricultural production of the country after
Khangai region. Increase of 89.7% in the western region’s agricultural production between 1999
and 2006 was higher than the country average.
2.5.1 Comparative assessment of the western region’s animal husbandry development
As of the end of 2007, the western region accounted for 12.3 billion heads of livestock or 30.6% of
the total livestock of the country and the animal husbandry sector produced 61% of the regional
GDP. But this percentage in the total livestock decreased from 32.9% of 1990. Between 1990 and
2007 percentage of growth of the number of livestock was much lower than the country average and
that of other regions as shown in the below table.
Table-16. Number of livestock, its percentage in the national total by regions
1990 1995 2000 2007 2007
Aimag & capital Thousand
Per cent Thousand Thousand Thousand
%
Per cent Per cent Per cent
heads
heads
heads
heads
1990
Western 8 499.7 32.9 9 682.9 33.9 8 702.4 28.8 12301.7 30.6 144.7
Uvs 1 666.6 4.9 1 754.2 4.6 1 579.3 4.1 2653.5 6.6 159.2
Khovd 1 687.7 4.9 2 070.6 5.4 1 836.3 4.7 2 564.3 6.4 151.9
Bayan-Ulgii 1 318.4 3.8 1 354.2 3.5 1 310.4 3.4 1597.3 4.0 121.2
Zavkhan 2 133.4 6.2 2 401.4 6.3 1 941.3 5.0 3 000.0 7.5 140.6
Govi-Altai 1 693.6 4.9 2 102.5 5.5 2 035.1 5.2 2 486.6 6.2 146.8
Khangain 8 080.6 31.3 9 570.3 33.5 10 711.7 35.4 14 031.0 34.8 173.6
Central 5 693.0 22.0 6 316.9 22.1 6 792.6 22.5 8 400.1 20.9 147.6
Eastern 3 440.0 13.3 2 707.9 9.5 3 790.1 12.5 5 199.7 12.9 151.2
Ulaanbaatar 143.6 0.6 294.3 1.0 230.6 0.8 331.2 0.8 230.6
TOTAL 25856.9 100.0 28572.3 100.0 30227.40 100.0 40263.8 100.0 155.7
Source: Statistical Yearbook of Mongolia, 1992, 2000, 2006, Statistical Bulletin, NSO, 2007
- 16 -

Number of heads of livestock of Mongolia increased by 14.4 million between 1990 and 2007 and
the western region accounted for 3.8 million of this figure or 26.4% which shows that it is an
important region for animal husbandry.
2.5.2 Comparative assessment of the western region’s crop production development
The western region doesn’t have a major position in the crop production compared to animal
husbandry as it is not favorable to engage in the production in terms of weather. But there is a
tradition that Khovd and Uvs aimags developed irrigated crop farming. The western region
accounted for just 2.9% of the total crop harvest nationwide in 2007 and this percentage decreased
almost twice the 5.6% of 1990.
Table-16 shows that only 16% of the crops harvested in 1990 was produced nationwide in 2007 as
the country underwent transition to market economy from 1990 with aids stopped and crop
production failing.
Table-17. Harvested crops, its percentage in the national total by regions
1990 1995 2000 2007 2007
Regions
% of
% of
% of
% of %
Tons
Tons
Tons
Tons
total
total
total
total 1990
Western 40,567.4 5.6 9,741.6 3.7 4,540.7 3.2 3,325.5 2.9 8.2
Uvs 20,200.4 2.8 8,411.4 3.2 2,479.6 1.7 2,157.7 1.9 10.7
Khovd 1,606.8 0.2 855.1 0.3 1,440.7 1.0 485.4 0.4 30.2
Bayan-Ulgii 538.8 0.1 20.6 0.0 13.4 0.0 6.4 0.0 1.2
Zavkhan 17,339.7 2.4 40.0 0.0 5.0 0.0
Govi-Altai 881.7 0.1 414.5 0.2 602.0 0.4 676.0 0.6 76.7
Khangai 193,440.1 26.9 56,319.8 21.5 33,506.7 23.6 26,369.6 23.0 13.6
Central 380,757.2 53.0 179,261.2 68.6 99,932.7 70.3 82,519.6 71.9 21.7
Eastern 103,569.9 14.4 16,105.0 6.2 4,086.0 2.9 2,563.5 2.2 2.5
TOTAL 718,334.6 100.0 261,427.6 100.0 142,066.1 100.0 114,778.2 100.0 16.0
Source: Statistical Yearbook of Mongolia, 1992, 2000, 2006, Statistical Bulletin, NSO, 2007
So this percentage is even lower for the western region and it harvested only 8.2% of the cereals in
1990 which showed that its crop production was in much decline. On the other hand, it is time to
think about reviving cereal production in the western region taking into account substantial increase
in the price of wheat in the world market in recent years.
But the amount of potatoes harvested by the region in 2007 is up by 16.7% than the level of 1990
and for vegetables, it is even twice as more.
Table-18. Harvested potatoes, its percentage in the national total by regions
1990 1995 2000 2007 2007
Regions
%
%
%
% %
Tons
Tons
Tons
Tons
total
total
total
total 1990
Western 15,870.9 12.1 5,346.4 10.3 11,318.8 19.2 18,514.1 16.2 116.7
Uvs 3,391.4 2.6 655.8 1.3 1,715.4 2.9 1,960.4 1.7 57.8
Khovd 2,951.2 2.3 2,571.6 4.9 4,934.2 8.4 9,429.0 8.2 319.5
Bayan-Ulgii 4,972.7 3.8 413.0 0.8 1,901.8 3.2 3,294.3 2.9 66.2
Zavkhan 3,405.3 2.6 1,218.6 2.3 1,549.7 2.6 2,440.1 2.1 71.7
Govi-Altai 1,150.3 0.9 487.4 0.9 1,217.7 2.1 1,390.3 1.2 120.9
Khangai 20,291.9 15.5 8,132.9 15.6 9,581.4 16.3 20,624.8 18.0 101.6
Central 87,732.6 66.9 27,814.9 53.5 26,156.8 44.4 65,419.2 57.1 74.6
- 17 -

Eastern 5,414.7 4.1 2,408.6 4.6 2,591.3 4.4 4,392.3 3.8 81.1
Ulaanbaatar 1,743.3 1.3 8,277.9 15.9 9,258.9 15.7 5,540.0 4.8 317.8
TOTAL 131,053.4 100.0 51,980.7 100.0 58 ,907.2 114,490.4 100.0 87.4
Source: Statistical Yearbook of Mongolia, 1992, 2000, 2006, Statistical Bulletin, NSO, 2007
The western region accounted for 16.2% of the total potato yield nationwide in 2007 and 18.2% of
that of vegetables which was increase compared to the level of 1990. Generally, the vegetable
production in the region has increased a lot more than that of 1990.
Table- 19. Harvested vegetables and its share in the country average by regions
1990 1995 2000 2007
2007
Regions
% of
% of
% of
% of %
Tons
Tons
Tons
Tons
total
total
total
total 1990
Western 6,689.4 16.0 1,749.7 6.4 6,462.5 14.7 13,893.3 18.2 207.7
Uvs 1,757.8 4.2 427.7 1.6 1,030.0 2.3 1,498.2 2.0 85.2
Khovd 2,602.0 6.2 801.3 2.9 2,959.8 6.7 9,573.9 12.5 367.9
Bayan-Ulgii 747.5 1.8 47.2 0.2 452.1 1.0 942.0 1.2 126.0
Zavkhan 872.9 2.1 139.6 0.5 671.0 1.5 1,357.5 1.8 155.5
Govi-Altai 709.2 1.7 333.9 1.2 1 349.6 3.1 521.7 0.7 73.6
Khangai 7,380.5 17.7 2,092.3 7.7 5,404.4 12.3 9,907.5 13.0 134.2
Central 22,617.1 54.2 17,133.8 62.8 24,248.6 55.1 46,754.4 61.1 206.7
Eastern 1,589.4 3.8 1,092.1 4.0 1,791.9 4.1 2,125.4 2.8 133.7
Ulaanbaatar 3,466.0 8.3 5,219.9 19.1 6,091.9 13.8 3,816.9 5.0 110.1
TOTAL 41,742.4 100.0 27,287.8 100.0 43,999.4 100.0 76,497.5 100.0 183.3
Source: Statistical Yearbook of Mongolia, 1992, 2000, 2006, Statistical Bulletin, NSO, 2007
2.6 Comparative Assessment and Development of Non-Agriculture Sectors of Western
Region
2.6.1 The western region’s industrial sector
Table-4 showed earlier that the industrial and construction sectors accounted for 0.6% of the
national GDP in 2006.
In each aimag of the region, there is a food processing plant, a power plant, a wood processing and
a garment-manufacturing factory, and coal and gold mine, and construction material plants are in
some aimags.
Table- 20. Industrial goods sale at current price by regions
1990 2000 2007
Regions Million,
Million,
Million,
2007/1990
% of total
% of total
% of total
MNT
MNT
MNT
Western 449.5 5.3 10,069.9 3.4 15,653.7 0.6 34,8 times
Uvs 90.4 1.0 3,836.8 0.7 4,906.7 0.2 54.3 times
Khovd 80.6 0.9 1,171.3 0.2 1,681.1 0.1 20.9 times
Bayan-Ulgii 108.3 1.2 2,472.8 0.4 3,230.0 0.1 29.8 times
Zavkhan 118.9 1.3 1,250.6 0.2 2,651.5 0.1 22.3 times
Govi-Altai 51.3 0.6 1,338.4 0.2 3,184.4 0.1 62.1 times
Khangai 1,481.7 17.6 203,239.8 68.5 1,168,080.9 44.9 78.7 times
Central 1,410.0 16.7 87,428.6 29.5 190,926.8 7.3 135,4 times
Eastern 383.2 4.6 4,251.5 1.4 147,152.2 5.6 384.0 times
- 18 -

Ulaanbaatar 4,700.8 55.8 269,172.6 90.7 1,081,121.6 41.5 221 times
TOTAL 8,425.2 100.0 574,162.4 193.5 2,602,935.2 100.0 308.9 times
Source: Statistical Yearbook of Mongolia, 1992, 2000, 2006, Statistical Bulletin, NSO, 2007
Table-20 shows that industrial capacity of the region declined considerably than it was in 1990. The
region produced 5.3% of industrial goods sold countrywide and its production declined gradually to
reach only 0.6% in 2007. As the sale of industrial goods was only at current price in the official
statistical data high growth percent was because of price increase to some extent. However, given
general trend of the growth increase in the western region’s industrial goods sale was the slowest
(34.8 times) compared to that of other regions and the country average.
2.6.2 The western region’s construction sector
In the last two years the state treasury investment grew rapidly which resulted in increase of the
amount of construction works nationwide and for the region too. However, most of the construction
works nationwide was carried out in Ulaanbaatar as shown in Table-21 (for 2007 265.9 times the
amount in 1990).
Table 21. Amount of construction works and major repair by regions
REGIONS
1990 1995 2000 2007
2007
Million, % of Million, % of Million, % of Million, % of
1990
MNT total MNT total MNT total MNT total
Western 318.9 17.9 1,641.5 7.3 3,381.1 5.8 16,973.7 5.8 53.2 times
Uvs 74.1 3.5 379.5 1.6 1,060.5 1.7 4,173.1 1.3 56.3 times
Khovd 92.7 4.4 601.8 2.5 1,446.2 2.3 4,881.8 1.6 52.6 times
Bayan Ulgii 53.9 2.6 182.5 0.8 143.0 0.2 2,547.4 0.8 47.3 times
Zavkhan 58.7 2.8 274.7 1.1 323.4 0.5 2,463.5 0.8 42 times
Gobi Altai 39.5 1.9 203.0 0.8 408.0 0.7 2,907.9 0.9 73.6 times
Khangai 308.6 17.3 5,145.9 22.8 10,983.2 18.8 42,872.8 14.6 138.9 times
Central 254.7 14.3 1,760.8 7.8 3,325.5 5.7 10,310.3 3.5 40.8 times
Eastern 79.0 4.4 364.6 1.6 895.6 1.5 4,635.6 1.6 58.8 times
Ulaanbaatar 819.4 46.0 13,620.4 60.4 39,830.8 68.2 217,877.5 74.4 265.9 times
TOTAL 1,780.6 100.0 22,533.2 100.0 58,416.2 100.0 292,669.9 100.0 164.4 times
Table-21 shows that the western region accounted for 17.9% of the nationwide construction works
in 1990 whereas it was just 5.8% in 2007. The construction works carried out in the region has
decreased considerably.
3. ASSESSMENT OF POVERTY LEVEL OF WESTERN REGION
The UN has set the worldwide poverty line at US$ 2 per person. Persons below this line are
considered poor. But those whose income is below US$ 1 per day are considered as extremely poor.
For our country the law on minimum living standard was approved in 1998 and the NSO is
responsible to measure and announce the minimum living standard of the population annually. The
below table shows the minimum living standard of the population by the regions as announced by
the NSO according to the law.
Table-22. Minimum living standard, MNT per capita per month by regions
Regions 2003 2004 2005 2006 2007
- 19 -

Western 19 500 20 200 23 200 37 000 54 700
Eastern 20 500 21 200 25 000 34 800 51 800
Central 19 800 20 600 22 300 39 000 56 700
Khangai 19 900 20 600 22 600 38 300 54 600
Ulaanbaatar 25 300 26 500 30 000 42 800 60 100
Source: Statistical Yearbook of Mongolia, 2006.
The poverty line is measured by filling the special consumer basket of poor people with the
cheapest food and consumer goods usually. Consumption of food by the poor is estimated to be no
less than 2100 kilocalorie per day as recommended by the World Bank in the poverty line
calculation.
It means that if all types of income for a member of a western region family is below MNT 54,700
then all the family members are considered to be poor below the poverty line.
Also the concept of extreme poverty is used in our country and it includes people whose income
doesn’t reach 60% in the poverty line.
The poverty survey of Mongolia was undertaken for the first time in 1995 and it is considered
impossible to compare its results with those of the poverty surveys of 1998 and 2003 in terms of
methodology and scope. So here we have used the results of the last three surveys in this survey as
no official data and survey materials on the poverty were available before this period. The poverty
surveys on the population of Mongolia in 1998 and 2003 were conducted with financial assistance
of the World Bank and the UNDP and participation of its officers using the common methodology
used internationally. But the 2006 survey was held by the NSO on its own and the poverty data was
collected by expanding the sample surveys on household income and expenditure undertaken
quarterly in the past.
The below table shows the share of the population living below the poverty line in the total
population according to results of the random survey on nationwide poverty conducted by the NSO
in 1998 and 2003 and the random survey on family business in 2006.
In 2003 36.1% of the total population lived poor and this figure didn’t change since 1998 basically
but decreased by 4 points to 32.2% according to the 2006 survey. Compared to 1998 in recent years
the poverty has spread in the rural areas as shown in Table 22.
As the living standard survey result of 1998 was not calculated by the regions the below table
shows the poverty levels for 2003 and 2006 for the regions.
Table-23. Basic poverty indicators by urban and rural areas and regions and country total
Poverty level, % Poverty depth Poverty severity
1998 2003 2006 1998 2003 2006 1998 2003 2006
Country total 35.6 36.1 32.2 11.7 11.1 10.1 5.6 4.7 4.5
Urban areas 39.4 30.3 27.9 13.9 9.2 8.6 7.1 4.0 3.8
Rural areas 32.6 43.4 37.0 9.8 13.2 11.9 7.4 5.6 5.3
Regions - 51.1 38.7 - 14.6 12.1 - 5.7 5.4
Western - 38.7 37.7 - 12.3 11.7 - 5.2 5.0
Khangai - 34.4 34.0 - 10.1 11.9 - 4.3 5.7
Central - 34.5 36.5 - 12.4 13.3 - 6.6 6.3
Eastern - 27.3 20.4 - 8.1 5.1 - 3.3 2.2
- 20 -

Ulaanbaatar - 51.1 38.7 - 14.6 12.1 - 5.7 5.4
Source: Living Standard Sample Survey Report, NSO, 1998, 2002-2003, Statistical Yearbook of Mongolia, 2006.
In 1998 32.6% of the rural population was below the poverty line which was lower than the country
average whereas it increased to 43.4% in 2003 up by 7.3 points than the country average of 36.1%.
In 2006 the rural poverty level was 4.8 point more than the country average.
The poverty depth and severity indices as indicators of poverty were higher in countryside than in
urban areas. The poverty depth is the indicator that shows how low average consumption level of
the poor was in relation to the poverty line. For example, it means that in 2006 average
consumption level of the rural poor was 11.9% lower than the poverty line. The poverty severity
index shows inequality among the poor.
According to the 2003 and 2006 survey results, the western region has the most widespread poverty
in Mongolia. In 2003 more than half of the western region’s population had incomes below the
poverty line which was much higher than the regional and country average figures.
It shows that the western region is behind in economic development level (lowest GDP per capita)
and has the most widespread poverty.
As for our country the presence of poverty in the population is considered to be due to many factors
such as lack of jobs, widespread unemployment, low income of the unemployed, and increase in the
price of consumer durables and services.
4. THE GOVERNMENT’S POLICY ON ECONOMIC DEVELOPMENT
4.1 The Government’s policy on rural and regional development
Mongolia comprises 1,564.1 thousand square km of land and though it ranks the top 17 th in the
world by territory, its population is 2.6 million. As it has a vast territory and is sparsely populated,
the Government’s policy on regional and rural development is important.
The main documents identifying the Government’s policy on socio-economic development in
Mongolia comprise laws passed by the SIK, policy documents, development programs, and action
plan of the Government, and Government resolutions and decisions.
• Article 25 of the Constitution of Mongolia states "The territory of Mongolia is divided
administratively into provinces and a capital city; provinces are subdivided into regions;
regions into communities; the capital city is divided into districts and districts into
neighborhoods", Article 28 states "The province, the capital city, region, and district are
administrative, territorial, and socio-economic complexes with their functions and
administrations provided for by law", Article 59 states "Governance of administrative and
territorial units of Mongolia is organized on the basis of the principles of both self-
Government and central Government", and Article 62 states "Local self-governing bodies
besides making independent decisions on matters of socio-economic life of the respective
province, the capital city, region, district, community and neighborhood organize the
participation of the population in solving problems of national scale and that of larger
territorial divisions" respectively making it primary provisions that set obligations and
powers of local Government in the state structure of Mongolia.
- 21 -

• The development strategy of Mongolia approved on May 03, 1996 under the resolution no.
26 of the SIK set objectives such as regional development of territories in the first stage
covering 1996-2000, setup of common infrastructure network and country-wide horizontal
axis and establishment and development of economic and free trade zones. The strategies
planned to link regions with domestic and international markets through infrastructure
network and create territorial development gravitational centers and axes in 2000-2010.
From 2010 to 2020 the third stage of the development strategy of Mongolia set the objective
to ensure relatively consistent development for regions through independence of aimags in
terms of economy.
• The SIK approved the regional development strategy of Mongolia in 2001. The
development strategy of Mongolia provisioned to develop our country dividing into 5
regions i.e. Western, Khangai, Central, Eastern and Ulaanbaatar. The main principle of this
strategy is to populate residents as dispersive as possible without centering in the capital and
central regions with relatively developed infrastructure providing opportunity for inhabiting
in remote areas, restrict migration to the capital and central region that has been on the rise
for the past 18 years, and develop economy by regions combining resources and decrease
difference between urban and rural areas.
• In 2003 the mid-term strategy for development of regions (to 2010) and the Regional
Development Administration and Regulation Law were approved. Approval of program to
develop the Western, Khangai, Central, Eastern regions and Ulaanbaatar to 2015 under the
resolution no. 22 dated September 28, 2005 ensured legal environment for the regional
development and clarified policies. The National Committee on Regional Development and
Regional Council were set up to implement these documents.
• The strategic document on support for economic development and poverty reduction
approved in 2003 by the Government of Mongolia provisioned to support regional and rural
development, develop infrastructure more, implement economic growth in line with the
sustainable development strategy, provide opportunity for rural population to develop in all
spheres as main objective of the rural development strategy of Mongolia and ensure their
welfare.
• The action plan of the Government set up as a result of the 2004 SIK election stated many
major objectives such as regional development program implementation appropriate for
regional features, implementation of policy to reduce difference between rural and urban
areas by developing towns and settlements that are highly important in the regions,
strengthening market competitiveness by supporting local advantages and developing rural
infrastructure and communications at regional level.
• Section 7 of the priority course of action for the Government approved under the
Government resolution no. 54 dated March 22, 2006 set objectives to support regional and
rural development, increase renewable energy consumption, implement the project to set up
hydropower plant, continue with millennium road construction, improve water supply for
pasture an Section 8 set goals to improve administrative division in stages, ensure
independence of local governance, and decelerate integration.
• Article 34.2 of the revised law on administrative and territorial units of Mongolia and its
governance adopted on December 15, 2006 by the SIK states "The Government may
delegate some of its powers and functions to governor and khural of aimag and district on
- 22 -

deceleration of integration, sourcing and management of local treasury, and planning
regional development if laws don’t provide otherwise". It shows that the first step has been
taken to decelerate integration by the Government and reduce financial and budgetary
centralization and provide legal environment.
The draft of comprehensive national development strategy of Mongolia based on Millennium
Development Goals approved in early 2008 by SIK set objectives to improve regional development
management and planning and accelerate regional development as priority. These objectives include
the following.
• Continue with implementation of development programs for the Western, Khangai, Central,
Eastern regions and Ulaanbaatar to 2015;
• Continue with development of common network of energy, road, communication and
database;
• Implement the general plans for Khovd, Uliastai, Erdenet, Kharkhorin, Darkhan, Zuunmod,
Undurkhaan, and Choibalsan as hub of the regions;
• Develop and implement general plans for development programs for aimags, microregions,
and soums and settlements;
• Support development of remote and less developed regions, rural SMEs, regional hub
towns with budget and tax policies;
• Set up regional development funds and regional negotiation;
• Make amendments in the law on regional development administration and regulation and
other relevant laws. Create optimal structure for regional governance.
All this defines the Government policy maintained on regional development in general.
Basically steadiness and continuity of the state policy in our country calls for criticism for research
workers. It is because political parties that win parliamentary election held every four years
implement the state policy according to its party policy. It is common that these parties change
actions and policies adhered to by the previous Government. Even there are cases where laws
adopted by the parliament are in conflict with the state policy developed previously. Its clear
example is the law on management and funding of public organizations approved in 2002 and
enforced since 2003. Since its enforcement with the relevant minister taking charge of funding of
public organizations, local Government’s power to allocate treasury funds have been eliminated 1 ,
local khurals were left with the power to discuss only budget of khural and governor’s office with
no right to change amount of the local budget sent by the Ministry of Finance increasing the
financial centralization as reckoned by the researchers. Under this law, vertical management of the
sector is in place and today the Minister of Education, Culture and Science allocates funds for soum
schools. Special survey participants entrusted to make recommendations on ensuring local
independence under the resolution no. 62 of the SIK issued in 2005 unanimously agreed 2 that the
law was ineffective to strengthen local self governance, ensure local independence, and decelerate
centralization. The survey was conducted by the ad hoc committee of the SIK. In recent years
although the state maintains the policy of decelerating centralization and ensuring local autonomy,
this law which restricts local powers is still complied unchanged today.
1
2
Open Society Forum, Policy Survey Series: Appropriate allocation of functions of national and local governance,
L. Luvsanjamts, 2004
Speech on ensuring local independence and deceleration of integration by Mr. D. Dondog, Head of Standing
Committee on State Structure of the SIK, April 2006
- 23 -

Although the SIK and the Government approved some 320 policy papers and development policies
on certain issues since 1990, its implementation is inadequate and it has not been publicized
transparently, it has not been monitored or evaluated to date. The main reason for failure in
implementation is that no funding source necessary for its implementation is identified every year.
Although the central Government presses to implement it doesn’t allocate required funds and plans
to fund with local treasury or foreign aid. But in reality it is not enough.
Many issues of the past years unsolved have proved that the regional development policy is not
implemented in reality and is in conflict with other laws. For example, Article 16.18 of the
Constitution states that citizen of Mongolia has the right to freedom of movement and residence
within the country, to travel and reside abroad, and to return to home country. According to this
right residents of the western region have been migrating to Ulaanbaatar and Erdenet to improve
their livelihood.
It was noted during the meeting of Mercy Corps Mongolia staff with Mr. G. Nyamdavaa, Governor
of Khovd aimag in February 2008 that the regionalized development policy has failed to be
implemented in the rural areas. It is due to many factors such as the current legal environment and
distribution of authority for aimags determined as hubs and other aimags of the region.
But the regional development strategy has failed to stop this migration as its objective and it still
continues. Investment is being made only in UB with more buildings built whereas there is not
much substantial investment in regional hubs and there are few residential apartments and buildings
built in the country.
4.2 The Government’s policy on animal husbandry development
Pastoral animal husbandry has been the main livelihood of nomadic Mongolians and the main
economic sector for many centuries. So Article 5 of the constitution of Mongolia states that the
livestock of the country is national wealth and subject to state protection. As the pastoral animal
husbandry plays an important role in the economy of Mongolia, the Government has been taking
much care to develop animal husbandry and protect livestock.
• Under the resolution no. 47 of 2001 national program to assist with protection of livestock
against drought and sever winter was developed and implemented from 2001 to 2005. The
program aimed to protect livestock against drought and severe winter, improve measures to
be taken in these emergencies and to recompense losses incurred, create aid network, define
responsibilities of public administrative bodies at all levels, and provide policy, regulation,
and assistance to ensure sustainable development of animal husbandry.
• Priority course of action for the Government approved under the resolution no. 54 dated
March 22, 2006 aimed to develop intensified agriculture and improve pasture water supply.
This is the priority for the present Government.
• Primary course of action to develop socio-economy of Mongolia between 2007 and 2009
embodies to provide legal environment for allocation and lease of pasture to
neighborhoods, herder groups and farmers considering regional features, solve pasture and
water issues in stages, lease land to dairy and meat production farms near urban areas and
regional centers and implement policy on financial support.
- 24 -

• In 2007 the Animal feed program was approved under the resolution no. 283 of the
Government and was planned to be implemented in two stages up to 2015. The program
aimed to increase animal feed production and its quality, create favorable economic and
legal environments to protect the animal husbandry sector against risks, improve feed
production technology, improve capacity to use pasture and fodder sustainably and pasture
use management.
Pursuant to the constitutional provision herders have been receiving assistance and support during
droughts and severe winters with the Government setting aside funds. On the other hand, tax
imposed on the herders is very low i.e. only MNT 2 billion for the nation as of 2006.
4.3 The Government’s policy on crop production development
• The action plan of the Government of Mongolia for 1996-2000 aimed to meet demands for
flour and main types of vegetables with domestic production as its main policy on crop
production. Unfortunately, even after 12 years, this objective was not met at all and the
present Government announced 2008 as year of food supply and safety improvement.
Under this objective it again aims to meet demands for flour and vegetables with domestic
production. Basically there are many policy objectives that have been unmet given the state
policy development and implementation of Mongolia.
• The crop production revival program was adopted under the Government’s resolution
no.103 of 1998 for implementation in two stages between 1998 and 2005. It is stated in the
program to adhere to policies to complete privatization of share of the state for crop
producing businesses, reform land relations for crop production, update equipment by
creating conditions to attract domestic and international investors, protect against soil
erosion preserving ecological balance, accumulate mineral substances, and introduce
advanced technology on increasing harvest per unit of area. But it was much different from
the previous programs as it calculated investment amount required for sourcing new
equipment, seeds, fertilizers, herbicide in detail in the program annex. It can be said that
this program was implemented to some extent and there were substantial progress made on
reforms in crop production equipment and machinery in recent years.
• The primary course of action for socio-economic development of Mongolia between 2007
and 2009 stated to maintain policy to develop more irrigated crop farming. In addition, it
planned to continue with implementation of the green revolution national program
supporting overhaul and setup of irrigation facilities, direct investment and domestic and
foreign aid to modernize crop production machinery, and production vegetables, fodder
plants and fruits.
Mr. S. Bayar, Prime Minister announced that the Government considered it was proper to
implement the Third Crop Production Campaign that aimed to meet food needs of the population
with domestically grown fresh vegetables when he met Darkhan-Uul aimag residents on January 11,
2008 which was testimony of the Government’s policy for this sector.
4.4 The Government’s policy on industrial development
• A document titled as policy on industry revival and development was adopted by under the
resolution no.157 of the Government in 1998 which had the following objectives.
a. Develop exports production as a priority and increase economic self-revival;
- 25 -

. Support foreign investment and technology transfer expanding foreign cooperation for
producers, introduce scientific progress to production intensively and create flexible
technology that meet market requirements;
c. Intensify industrial structural changes and strengthen base for market economy
development;
d. Develop biotechnology and process agricultural raw materials and minerals fully to produce
environmentally friendly and world market competitive new products;
e. Expand rural SMEs that substitute imports and meet demands equally, decrease industrial
centralization by creating more jobs;
f. Improve soft infrastructure that serves production and create legal and business
environments.
The industrial sector development policy aimed to meet the following objectives.
1. Minerals and raw materials processing
a/ Increase production of natural products and intensify raw materials processing and
increase minerals production efficiency;
b/ Improve utilization of capacity of operating plants, supply some domestic plants with
raw materials, produce pure metals and alloys, and develop SMEs that produce hand
tools;
c/ Develop petroleum production and produce final product, set up chemicals producing
plant to increase domestic production of lubricants and some types of organic
substances and solvents.
2. Livestock commodity processing
3. Other fields
d/ Improve processing level of livestock commodity and increase production of final
products;
e/ Discover and use untapped reserve of raw materials and expand production of types
of product that has world market competitiveness;
f/ Increase type of products and improve packaging, and increase production of
products that meet hygiene and food safety requirements.
g/ Increase efficiency of natural resource processing and increase domestic production
of products containing protein and vitamins, biopreparations, veterinary drugs, and
cosmetics.
• SME support program was approved under the resolution no. 64 of the Government in 2005
to implement in two phases between 2005 and 2008. The program mainly aims to develop
SMEs, increase its competitiveness, create favorable environment for businesspeople to set
up SMEs, create and increase jobs. It plans to implement these goals with the following
objectives.
1. Create legally favorable environment to support SMEs;
2. Ensure efficient service provision by public organizations for SMEs;
3. Support SMEs with financial and tax policies;
4. Create mechanisms for holding trainings that are in demand by SMEs, providing
information and consultancy, and supporting.
- 26 -

There are very few policy papers on development of the construction sector. In 1998 the law on
construction was passed to regulate relations on designing buildings, production of construction
materials, construction and use of buildings, and technical monitoring.
4.5 The Government’s policy on reduction of poverty and unemployment
The Government of Mongolia has set major objectives to decrease poverty and unemployment and
approved many policy papers. The main election slogan of the ruling party in 2000 was “Save the
state from crisis and eliminate poverty for the people” and electors supported this objective
allowing absolute victory for the party.
• In September 2000 the President of Mongolia attending the UN assembly that adopted
Millennium Declaration signed it. The declaration aimed to reduce poverty for people in the
new millennium and ensure new quality of livelihood. The SIK identified and adopted
millennium development objectives adapting the declaration to the country. As a result of
its implementation the poverty in the country was to decrease two times and reduce
percentage of the poor in the total population under 18% by 2015.
• In 2001 the SIK approved the Law on Employment Support and its Article 4 defined the
Government’s policy on employment support in the following manner:
1. Provide opportunity for employment for the population;
2. Coordinate investment with employment support measures;
3. Regulate workforce demand and supply effectively;
4. Develop workforce in line with market demands;
5. Improve registration and database of employment of the population;
6. Expand the scope of individuals covered under unemployment insurance and protect
each citizen against unemployment.
• The Government of Mongolia developed and approved strategic paper on economic growth
support and poverty reduction in 2003 with recommendations from the World Bank. The
document outlined to increase economic growth and ensure stability for people’s livelihood
for 2003-2007 using three approaches i.e. provision of business environment, ensure macro
economic stability and support human resource development. Also it set out that one of the
main objectives of poverty reduction strategy was to allocate resources generated as a result
of the economic growth appropriately among the population especially direct it to the poor.
• The holistic policy on the national development based on MDGs approved by the SIK in
January 2008 outlines to intensify economic growth of Mongolia, increase number of jobs
substantially, strengthen families, develop livelihood capacity of people, eradicate poverty
by reforming the employment and social welfare system entirely and achieve the MDGs.
THE FIRST STAGE (2007-2015):
Strategic objective #1. Implement economic policy directed toward the poor and to
create relatively well-off middle class and reduce poverty twice by ensuring their income increase.
1. The strategic document on support for the economic growth and poverty reduction will be
updated regularly once every two years in line with the National Development Policy and
implementation will be intensified.
- 27 -

• Keep the real unemployment level below 3.0%;
• Register each poor and unemployed citizen with lower income than the minimum living
standard and involve in vocational trainings to provide them with jobs;
• Provide economic incentives for businesses that create new jobs.
THE SECOND STAGE (2016-2021):
Strategic objective #2.
Increase employment and improve social welfare and service quality.
• Bring supply of jobs to the level of developed countries;
• Develop welfare system based on family, society and colleagues.
Thus, the Government has paid much attention to reduce poverty, developed many programs and
plans, set high aiming objectives, and implemented many projects to reduce poverty by donor
countries since the mid 1990s. However, the final outcomes are meager. According to results of the
random survey on nationwide poverty conducted by the NSO in 1998 and 2003 and the random
survey on family business in 2006, 32-36% of the total population lives below poverty line and
there has not been much change in the poverty situation proving the above. It is hard to hope and is
rather doubtful that the objective of Mongolia to reduce the poverty level twice by 2015 in the
MDG will be implemented in the remaining 7 years.
Although the Government has been paying attention to reduce poverty it is still high among the
population. The poverty level stood at 14.2% as the country total as per the random survey results
of 2003 on workforce. Theoretically it is not considered as serious if the poverty level is 3-4% of
the workforce according to the world standard, but this figure is a way too high for Mongolia.
5. DEVELOPMENT TRENDS AND OPPORTUNITIES FOR THE WESTERN REGION
5.1 Future trends of the economic development of the western region
The economic development trends are bright as envisaged. Also with construction and utilization of
12 mW Durgun hydropower plant in Khovd aimag and 11 mW Taishir hydropower plant in Govi-
Altai in 2008, electricity supply will improve substantially and provide favorable opportunity for
SME development. On the other hand, in recent years Mongolia has softened its monetary policy at
macroeconomic level and adhered to the policy of expanding the overall economy, accelerated the
economic growth, increased the government investment in regions and infrastructure sharply
thereby providing favorable environment for regional economic revival. Such a favorable
environment wasn’t in place in the last years in the region.
Using the dynamics of the GDP of Mongolia and the western region for the years from 1999 to
2996 given in Appendix 1, the GDP of the country and the region is shown in Appendix 2
calculating its growth in the coming years with statistical extrapolation method. We chose the
method of calculation with linear equation of y = a + bt among the extrapolation methods to project
the basic trends of the dynamic row. The outcome of the calculation is shown in Picture 6. The GDP
of Mongolia is shown in black lines for the years from 1996 to 2006 at the current prices and its
amount is shown on the right axis with the GDP of the western region in pink lines and its amount
in the left axis. The general trend of the GDP growth for the years from 1996 to 2006 is similar in
the country total and for the western region. But for the western region the GDP didn’t only
- 28 -

increase between 1999 and 2002 but declined more in 2002 than it did in the previous years.
However, it began to increase from 2003 faster. When the general trend of the GDP growth of
Mongolia and the western region is expressed in y = a + bt linear equation (show in blue and green
lines in the picture) it tends to increase for both though gradually from 2007 to 2009. But the
nation’s GDP tends to increase faster than that of the western region as the two lines got closer in
2009 in the picture.
But the standstill and decline of this dynamics between 1999 and 2002 had impact on tis future
trend and held it back leading to the lower level for 2007-2009 than that of 2006. But we can’t
forget that price increase had its impact as the GDP was taken at its current price.
Table-10. Growth trends of the GDP of Mongolia and the western region, dynamics of 1999-
2006, year-wise, million MNT
Western region, billion MNT
300.0
250.0
200.0
150.0
100.0
50.0
0.0
266.2
248.7
231.2
213.7
3474.8
196.2
3218.1
178.7
2961.4
161.2
2704.7
2448.0
126.2
2191.3
108.7
1934.6
91.3
73.7
1421.2 1164.5 907.8
651.1
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
4000
3500
3000
2500
2000
1500
1000
500
0
Country total, billion MNT
GDP of the western region Western region y=a+bt
Country total GDP Country total y=a+bt
But when the calculations are made for 2002-2006, the growth pace for the past five years has more
emphasis and gives a picture that the GDP will grow speedier for 2007-2009 as shown in Picture-7.
Given the calculations made based on the dynamics of 2002-2006, the GDP of Mongolia and the
western region looks to grow in similar trends.
- 29 -

Table -11. Growth trends of the GDP of Mongolia and the western region, dynamics of 2000-
2006, year-wise, million MNT
400
374.1
5000
Western region, billion MNT
350
300
250
200
150
100
50
84.6
1091.04
125.9
1581.81
167.3
2072.58
208.6
2563.35
250.0
3054.12
291.4
3544.89
332.7
4035.66
4526.43
4500
4000
3500
3000
2500
2000
1500
Country total, billion MNT
1000
500
0
2002 2003 2004 2005 2006 2007 2008 2009
0
Western region’s GDP
Country total GDP
Western region=a+bt
Country total=a+bt
As per the last version of the calculations, the western region’s GDP tended to reach MNT 291.4
billion in 2007 increasing by 16.6% than that of 2006, tends to reach MNT 332.7 billion in 2008
increasing 14.2% than that of the previous year, and reach MNT 374.1 billion in 2009 growing by
12.4% than that of 2008. As this growth has been estimated on the GDP growth for the past five
years, it can’t be denied that it could be even higher in reality due to favorable factors mentioned
above.
5.2 Opportunities of the development of the western region
Outcome of the meetings and interviews held on site testify that there are opportunities to increase
and accelerate the economic development level of the western region.
Given the survey done during the western region’s development program, there are 294 properties
containing 15 types of minerals discovered in the region. 39 of it contain 8 types of minerals and
others are occurrences. These include 12 gold properties prospected, 2 gold and polymetal, 1 silver,
2 copper, 1 silver and polymetal, 3 tungsten, one each for rare metal and iron and phosporite, and 15
coal ones respectively. These properties contain 0.5 tons of gold (0.35% of the estimated total
reserve of Mongolia), 2850.0 tons of silver (33%), 124.9 thousand tons of copper (2.0%), 33.6
thousand tons of tungsten (20.0%), 94.6 million tons of coal (1.0%), 31.6 million tons of
phosphorite (11.0%) respectively. To develop mining industry in the western region first of all it is
necessary to mine deposits of gold, gold-polymetal, silver, phosphorite, silver-polymetal, tungsten,
rare metals and intensify prospecting and exploration for these metals. There are opportunities to
reform and improve the western region’s economy if we succeed in taking serious measures to mine
Asgat silver deposit in Bayan-Ulgii, Bayan Airag copper-gold deposit in Zavkhan, Taliin Meltes
gold deposit in Govi-Altai, rare metals in Khovd immediately and implement major projects on
- 30 -

electricity, transport and communications that are under way in a short period. In case the issues of
development and mining of Asgat silver deposit in Bayan-Ulgii aimag are solved quickly, it will
bring positive changes for the regional economy.
Given the survey done during development of the western region’s development program approved
under the resolution no. 2002 dated September 28, 2005, there are relatively plenty of raw material
resources to develop the industry in the region. For example, the region accounts for 23.3% of the
total exportable meat of the country and is behind the Khangai region in this regard. So it is feasible
to set up and develop SMEs engaged in meat production and increase revenue from meat export.
Also the western region leads others in supply of sheep wool and goat cashmere and is able to
supply 30.4% of sheep wool, 33.8% of goat cashmere, 27.3% of camel cashmere, and 18.4% of
horse and cattle moult.
Wild sea-buckthorns grow plenty in the basins of Tes River and Bulgan River in Khovd and its
shrub produces 20 kg of berry having enormous values and nutrition. 90% of the world’s seabuckthorns
are grown in Mongolia and its 70% is cultivated in Uvs as we noted earlier. Uvs aimag
sea-buckthorn has become a famous brand in Mongolia. Mr. B. Laagan, honored agronomist of
Mongolia wrote in "Zuuny Medee" newspaper dated September 14 last year that there was
opportunity to expand sea-buckthorn fields to contribute to the economy of the country. Some 100
labs of Japan tested Mongolian sea-buckthorn and agreed that it contained valued nutrients. Locals
say that commencement of construction of airport at Kheer Morit hayfield in the foothills of
Kharkhiraa Mountain in Uvs aimag by Japanese is because of the plant only. There is a nice valley
with muddy soil 20 km wide and 200 km long from Ulaangom town to Baruun Turuun farm. It has
some 300,000 ha and if sea-buckthorn is grown here it could contribute not only to the Uvs
economy but also to that of the country as suggested by Mr. Laagan, agronomist. Cultivation of seabuckthorn
will contribute to the environmental reclamation and greening of the area that is drying
year by year due to global warming. This shows that if the region cashes in on this opportunity it
could provide a new source of income and develop its economy faster.
Here are plenty of resources to attract domestic and foreign tourists with its picturesque landscapes
of mountains, gobi, and forest, multi-ethnic traditions and customs, historical and cultural sites. The
master plan on tourism development to 2015 envisages developing the western region as an
attractive area for tourism. In 1996 UNESCO registered Yamaat Mountain, Khoit Tsenkher cave in
Mankhan soum, and protected Otgontenger Mountain as world heritages under the outstanding
world value category.
There are opportunities to promote scenic natural beauty of Mongolia and lifestyle of many ethnic
groups. Tourists can ride boats in club rush or reed, do bird watching, stay in tourist camps along
Uvs lake or Khar Us lake and go fishing. Opportunities exist for development of mountain trekking
in Altai Tavan Bogd, Tsambagarav, Tsengel Khairkhan, Munkhkhairkhan, Tsagaan Deglii, Tsagaan
Shuvuut, Turgenii Nuruu, Kharkhiraa mountains, canoeing in Tes, Turgen, Kharkhiraa, and
Khangiltsag rivers and water sports in the northern bank of Khar Us Lake. The western region is an
ideal place for development of historical, archeological and ethnographic tourism.
6. CONCLUSIONS
1. Given the development of Mongolia and the western region for many years its economy based
on the pastoral animal husbandry is highly dependent on weather, has many risks and low
productivity and bleak prospects due to global warming, intensive mining sector development
leading to environmental degradation, and rapid increase in the number of goats among other
- 31 -

animals. This economic structure has been creating main obstacle for future rural
development.
2. As we look at the socio-economic development indicators of the western region for the last
decade, its economic development level is rather lower than that of the other regions and the
country average and pace of its growth is slow. Although the western region occupies more
than one quarter of the territory of Mongolia and constitutes 16% of the population, it made
up only 8.2% of the GDP as of 2006. The position of the western region in the economy of
Mongolia has been on the decline. Contribution of the western region to the economic growth
and development of Mongolia is little. Between 1999 and 2006 GDP of Mongolia increased
by MNT 2246.6 billion and share of the western region was MNT 156.8 billion or 7.3%.
3. The slow economic development of the western region is considered to be because of much
backward economic structure in the first place, pastoral animal husbandry constituting 61% of
the region’s GDP, and weak infrastructure development and productive industries that have
more added value.
4. Given the brief survey, though the number of business entities of the region increased from
858 between 1998 and 2007 in 1998 it hosted 14.2% of the business entities country-wide
whereas in 2007 it decreased to 8.8%. It is certain that it influenced to decelerate the
economic development of the western region. In comparison with the other regions,
businesses have not taken off that well. Due to all these factors, its financial capacity is weak
and Zavkhan, Govi-Altai, Uvs, and Bayankhongor aimags that make up this region are not
able to cover its expenditure constituting 59.6-65% of its revenue with subsidy from the state
treasury in 2007.
5. The inflation increase has been higher than the country average even in recent years due to its
remoteness from the capital and the central region and other reasons. Compared with 1996 the
inflation growth has been different in the western region aimags. The inflation growth was
more in Ulaanbaatar until 2006 whereas the consumer goods and service price in Khovd
aimag went up rapidly from 2002 and from 2003 in Govi-Altai. It is striking that the prices
were more than that of the country average in 2006 and 2007. But the inflation growth was
relatively less in Bayan-Ulgii and Zavkhan aimags. It appears costly to engage in production
and service provision in the western aimags and unit price looks to be higher. Price of
electricity supplied from Russia is more than that of the central region and transportation costs
are higher to procure raw materials from the capital all leading to increase in production costs.
6. Owing to low economic development level and weak development of all sectors other than
animal husbandry, shortage of jobs, low income of people, and low productivity, its poverty
level is higher than that of the other regions. Though many measures have been taken to fight
the poverty it has not achieved considerable results.
7. As we take the western region aimags there is a certain correlation between its economic
development and number of its population. The population of Khovd and Bayan-Ulgii aimags
increased by 3-10% between 1990 and 2007 and that of the other aimags decreased. The
Zavkhan aimag population decreased by 11.4% and that of Govi-Altai by 5.3% which made
the largest numbers. But Zavkhan and Govi-Altai that took the lead in income per capita in
1999 lost their positions and in 2006 Khovd and Bayan-Ulgii came to the top. Between 1999
and 2006 the economic development was highest in Bayan-Ulgii and Uvs aimags. Bayan-
Ulgii among its peers led the race in number of population and economic development with
increase in financial resources. In 2007 it collected 94.7% of its local treasury on its own.
- 32 -

8. Another fact that affects the western region’s economic development negatively is migration
of its population. Mostly people with educated and at employable age have been migrating
from the region. The western region population continues to migrate to Ulaanbaatar, Erdenet
and the central region in search of jobs and has decreased by 9,000 for 17 years since 1990.
Kazakhs of Bayan-Ulgii aimag has contributed their share by migrating to Kazakhstan in
large numbers.
9. Although the economic development level is poor in the western region, its development
prospects are bright as envisaged. Given the statistical extrapolation of the GDP of the
western region, in the coming years there will be economic growth here. Also with
construction and utilization of the 12 mW Durgun hydropower plant in Khovd aimag and 11
mW Taishir one in Govi-Altai in 2008, electricity supply will improve substantially and
provide favorable opportunity for SME development. On the other hand, in recent years
Mongolia has softened its monetary policy at macroeconomic level and adhered to the policy
of expanding the overall economy, accelerated the economic growth, increased investment in
regions and infrastructure sharply thereby providing favorable environment for regional
economic revival.
10. This survey shows that there are untapped opportunities to develop the western region’s
economy. There are relatively ample raw material resources to develop the industrial sector of
the western region. For example, the region accounts for 23.3% of the total exportable meat
and is behind the mountainous region (37.5%). So it is feasible to increase income from
export of meat by developing meat producing SMEs. Also the western region is a countrywide
leader in supply of sheep wool and goat cashmere and has capacity to supply 30.4% of
nation-wide sheep wool, 27.3% of camel cashmere and 18.4% of horse and cattle hair/moult
respectively. There are many opportunities to develop irrigated crop growing and revive
wheat production to the early 1990s and expand sea-buckthorn production to generate more
income. By improving the regional infrastructure, opportunity exists to develop tourism in the
area.
11. Although many documents identifying main fields of policy to be adhered by the Government
on rural and regional development issues have been issued and many programs and projects
have been developed, its implementation is weak. Though several documents were issued in
support of the regional development policy approved in 2001, implementation of the
objectives set out therein is inadequate given the example of the western region.
12. Although the Government of Mongolia has implemented programs and projects setting policy
objectives and focusing more on unemployment and poverty reduction, the final outcome is
very inadequate. It is hard to hope and is doubtful that the objective of Mongolia to reduce the
poverty level twice by 2015 in the MDG will be implemented in the remaining 7 years. This
picture is bleak for the western region too.
13. The action plan of the Government of Mongolia for 1996-2000 aimed to meet demands for
flour and main types of vegetables with domestic production as its main policy on crop
production. Unfortunately, even after 12 years, this objective was not met at all and the
present Government announced 2008 as year of food supply and safety improvement. Under
this objective it again aims to meet demands for flour and vegetables with domestic
production. Basically, there are many policy objectives that have been unmet given the state
policy development and implementation of Mongolia.
- 33 -

14. The mechanism of monitoring of implementation of the government policies in Mongolia is
developed by the particular ministry allowing it to evaluate performance of its activities and is
dominated by the sectoral biased interests. Basically there is no mechanism to conduct
external and independent monitoring on the government policy implementation in Mongolia
and no such practice. That is why there is inadequate implementation of the policy papers and
many objectives set remain unachieved just in papers.
7. SUGGESTIONS AND RECOMMENDATIONS
The suggested recommendations contain opinions and conclusions of the author who has made it
based on this survey.
1. The keys to accelerate the economic development of the western region is further
development of animal husbandry and crop production and radical reform of the regional
economy by developing those sectors that have added value apart from agriculture.
2. I have come to the conclusion that mechanization and automation of agriculture is the most
prospective policy to develop the economy of the western region. In order to do so it is
important to set up various small enterprises that process meat, milk, sea buckthorn, wool,
cashmere, and vegetables to produce value added products, develop irrigated crop production
in Khovd aimag, revive cereal production, and produce flour. Opportunities exist to produce
wheat and spirit from vegetables.
3. It is advisable to produce coking coal, combustible gas, and liquid fuel taking advantage of
coal deposits and set up small enterprises that produce cement, bricks and concrete and
construction wares and furniture in Uvs and Zavkhan aimags. These enterprises will have
much impact on the region’s economy in future.
4. Before setting up these enterprises, its feasibility and market studies should be conducted and
recommendations ought to be developed. Then it should be included in the mid- and longmilleniumterm
development plans for the region and train necessary personnel in stages.
5. Thermal power plant should be set up at Khushuut coal deposit in Khovd to produce
electricity and energy apart from the hydropower plants in construction to have a reliable and
domestic source of energy independent of Russia and influential for the infrastructure and
economic developments of the region. Cheap and reliable energy will enable establishment of
those enterprises suggested for the region and development of other SMEs. Paved roads will
play important role to link the region to the central region markets. To do so we need to
continue construction of vertical and horizontal axes of the millennium road.
6. Opportunities exist to develop meat and dairy farming in the aimag centers of the region and
towns to meet needs of its population for meat and milk.
7. Much investment will be required to set up the suggested enterprises and it is feasible to use
soft investment loans, donors’ aids and loans, the government treasury, and private
investment.
- 34 -

REFERENCE
1. Constitution of Mongolia, 1992
2. Development Vision of Mongolia, annex to the resolution no. 26 of the SIK dated May 03,
1996
3. Regionalized Development Policy of Mongolia, 2001
4. Regional Mid-Term Development Strategy (up to 2010), 2003
5. Regionalized Development Administration and Regulation Law, 2003
6. Action Plan of Government of Mongolia. Annex to the Government resolution no. 24 of
2004
7. Priority Course of Action for the Government. Annex to the Government resolution no. 54
dated March 22, 2006
8. Program for Development of Western, Khangai, Central and Eastern Regions and
Ulaanbaatar to 2015, annex to the Government resolution no. 202 dated September 28, 2005
9. Revised Law on Administrative Units of Mongolia and Its Governance, 2006
10. Statistical Brochure of Mongolia, NSO ,1992, 1995, 2000, 2006
11. Statistical Yearbook, NSO, 2007
12. Draft of Comprehensive National Development Strategy of Mongolia based on Millennium
Development Goals, 2007
13. Population and Housing Census Results for 2000
14. Sample Survey Report on Living Standard, NSO, 1998, 2002-2003
15. Topical Survey on Economic Activity of Population, NSO, 2001
16. Open Society Forum, policy survey series: Appropriate allocation of functions of national
and local governance, L. Luvsanjamts, 2004
17. Speech on Ensuring Local Independence and Deceleration of Integration by Mr. D.
Dondog, Head of Standing Committee on State Structure of the SIK, April 2006
18. Primary Course of Development of Socio-Economy of Mongolia in 2007, Trends for 2007-
2009, Ministry of Finance, 2006
19. National program on assistance with protection of livestock against drought and severe
winter, annex to the Government resolution no. 47 of 2001
20. Crop Production Revival Program, annex to the Government resolution no. 103 of 1998
21. Animal Feed Program, annex to the Government resolution no. 283 of 2007
22. Employment Promotion Law, SIK, 2001
23. Strategic Document on Economic Growth Support and Poverty Reduction, 2003
24. Industry Revival and Development Policy, annex to the Government resolution no. 157 of
1998
25. SME Support Program, annex to the Government resolution no. 64 of 2005
26. Law on Setting Minimum Living Standard, SIK, 1998
- 35 -

Annex I: Uvs Aimag Government Support for private sector development
BUSINESS DEVELOPMENT ACTIVITIES OF GOVERNOR'S OFFICE IN 2007
ITEM ACTIVITY NAME OUTCOME
Production Sector Rehabilitation & Development Policy Coordination
Obtain decisions on some
issues related to support of
private sector
Facilitating business linkages
for local business community
Rock salt and barley project
development
▪ Ministry of Industry & Trade, Governorate and Has bank signed a
tripartite agreement, established a joint fund worth MNT 58 mln,
approved Fund Committee and Rules, and disbursed loans worth
MNT 24.35 mln to 4 citizens.
▪
▪
▪
▪
▪
▪
▪
▪
In 2007, in accordance with Mongolian Law on Special Permit for
Economic Activity, the licences were issued to 5 local economic
entities for mineral exploration on 52,029 ha, and to one entity for
land use on 947 ha.
In 2007, aimag's SME Support Fund, in order to set up small scale
factories fitted to local condition, has issued loans worth MNT 13.4
mln with 1% monthly interest rate to 13 economic entities.
In partnership with aimag's Labour Welfare Office the governorate
has conducted 3 trainings on business start-up and development,
issued certificates that permits economic activity to 73 people and
involved some of them in the lending program of Labour
Employment Support Fund.
Facilitated participation of one group from each soum in the selection
process organised under Manufactured in Mongolia project having
the aim to increase role of local SME implemented by UNDP and
Ministry of Industry & Trade, and the groups producing seabuckthorn
in Ulaangom and salt products in Davst soum were selected among 8
major nominations.
Organised and involved 8 economic entities and individuals in
"Western Region - 2007" trade fair organised in the western region
under the patronage of Mongolian President. Grand Prix was awarded
to Uvs Food LLC for "Hanhuhii" brand, sectorial grand prix - to
"Durvun Bulag" partnership for leather goods, prize for most
demanded product of fair - to Mungulug Center, prize for best
product of western region - to "Zelgovi" LLC for their sausages,
"Tsahir" noodle factory for sliced noodles, "Belbulag" for Uvavit
drink, "Us Erdene" for black currant syrup, as well as to Ulaangom
Vollege teacher Byambaa for Mongolian national garment "deel".
Organised "Uvs Partnership - 2007" trade fair in partnership with
aimag's branch of Chamber of Industry & Commerce under three
segments which are public catering, food industry and vegetables.
Soums, economic entities and individuals as well as three Russian
companies participated in trade fair winning Grand Prix.
Organised and involved 3 entities in the trade fair in UB organised
under "One Village - One Product" project. Seabuckthorn product
made by "Us Erdene" LLC became Best Product at the national level.
A group comprising of local citizens making different wares from
rock salt was formed, defined own goal and objectives, involved in an
array of services being provided by "Manufactured in Mongolia"
project under "One Village - One Product" program, and imported
their brand product of Shudet Mountain Rock Salt to Japan. This
products participated in "One Village - One Product" national trade
fair in Japan and won Hiramatsu Prize.
- 36 -

Allocate MNT 120 mln to
SME Support Fund and
support economic entities
which contributes to
successful implementation of
"One Village - One Product"
and "Seabuckthorn" programs
Organize Mineral License
Holders' Forum
▪ Helped Champion of State AG Farming P. Ganbaatar to develop a
project on barley production and get funding from SME Support Fund
in the form of low interest loan.
▪ In order to support SME operators in Uvs aimag, got approval for
MNT 120 mln, reviewed 84 project proposals submitted from soums,
made suggestions to SME Support Fund, and disbursed interest free
loans with the repayment period of 1 to 3 years and the size ranging
from MNT 0.8 mln to 10.0 mln to 8 people for seabuckthorn
production and to 18 entities and individuals under "One Village -
One Product" program.
▪ Organised Accountable Mining and Environmental Protection Forum
for mineral license owners discussing the following issues - current
status of mineral geological exploration and extraction activities and
trends for sustainable development of mining sector based on
environmentally sound technologies.
▪ These forum, business meeting, discussion and its outcome aimed at
prompt implementation of Governmental Programme of Actions,
action plan of aimag governor, and newly adopted Mineral Law have
attracted over 150 participants including soum governors, chairmen
of Citizens Representative Hurals, rangers, relevant national and
aimag level professional inspectors, mineral exploration and
utilization license holders, aimag's Environmental Office, led by
aimag governor, and issued recommendations to the soum and aimag
government organisations, extractive business organisations,
environmental inspectors and rangers.
Foreign & Domestic Trade
Policy Coordination &
Implementation
Develop and Implement Policy for Service Organisations
Support foreign and domestic
trade, continue
implementation of Wholesale
Trade Network Program
Expanding scope of servicing
activities
Give recommendations and
conduct monitoring on
activities of Cooperative
Developing Soums Branch
Committee
Sued by court Anod bank which secured loan for Tod Mongol company
selected through the tender to implement a wholesale trade network project
and solicited making a decision to repay loan. Proposed to re-implement
the program to project implementation unit.
▪ Hairdressers & Beauticians Association was established, inclusive of
34 specialists in its rank.
▪ Refresher courses were organised two times for hairdressers.
▪ 21 hairdressers were involved in the certification process graduating
one hairdresser with 1st category, 3 - with 2nd, and 17 - with 3rd.
▪ Under the activity of upgrading the capacity of service workers, out
of 65 cooks engaged in the refresher course 52 had passed
qualification criteria and got certificates.
▪ Invited consultants from UB who conducted trainings to 40 staffs of
gas stations and 20 hotel personnel.
▪ Gave recommendations and monitored the activities of Cooperative
Developing Soums Branch Committee.
▪ Provided MNT 3 mln worth equipment and other facilities to Uvs
Cooperative Information & Training Center enabling it to render
training, promoting and consulting services.
▪ Organised in collaboration with Production & Services Cooperatives
Union a demo training at "Hudulmuriin Shim" cooperative involving
20 cooperators. The training was attended by Deputy Minister of
Food & Agriculture P. Ulaankhuu.
- 37 -

Implementation of
Governmental Programme of
Actions
(Clause 1-2 of Section 2.14)
Implementation of One
Village - One Product, SME
Support Program and
Cooperative Development
Sub-Program
Inserted a new "One Village - One Product" column in Uvs Amidral
newspaper, published 4 articles about Uvs aimag brand product -
seabuckthorn and progress of Seabuckthorn Program implementation
making them public.
Facilitated participation of one group from each soum in the selection
process organised under "Manufactured in Mongolia" project having the
aim to increase the role of local SME implemented by UNDP and Ministry
of Industry & Trade, and the groups producing seabuckthorn in Ulaangom
and salt products in Davst soum were selected among 8 major
nominations.
Organised and involved 8 economic entities and individuals in "Western
Region - 2007" trade fair organised in the western region under the
patronage of Mongolian President. Grand Prix was awarded to "Uvs Food"
LLC for "Hanhuhii" brand, sectorial grand prix - to "Durvun Bulag"
partnership for leather items, prize for most demanded product of fair - to
Mungulug Center, prize for best product of western region - to "Zelgovi"
LLC for their sausages, "Tsahir" noodle factory for sliced noodles,
"Belbulag" for Uvavit drink, "Us Erdene" for black currant syrup, as well
as to Ulaangom Vollege teacher Byambaa for Mongolian national garment
"deel".
Organised "Uvs Partnership - 2007" trade fair in partnership with aimag's
branch of Chamber of Industry & Commerce under three segments
including public catering, food industry and vegetable growing sectors.
Soums, economic entities and individuals as well as three Russian
companies participated in trade fair winning Grand Prix.
Aimag's SME Support Fund, in order to set up small scale factories fitted
to local condition, has issued loans worth MNT 13.4 mln with 1% monthly
interest rate to 13 economic entities.
In order to support SME operators in Uvs aimag, got approval for MNT
120 mln and funded business activities of 26 economic entities and
individuals.
Ministry of Industry & Trade, Governorate and Has bank signed a
tripartite agreement, established a joint fund worth MNT 58 mln, approved
Fund Committee and Rules, and disbursed loans worth MNT 24.35 mln to
4 citizens.
Building upon the directions formulated by the national committee for
implementation of "One Village - One Product" program, devised a plan of
activities having it approved. In accordance with the plan trade fairs were
organised in soums and aimag center, successfully participated in the
regional and national level fairs. At the end of the year conducted
monitoring on the activities implemented by the soums.
Within the framework of SME Support Program organised needed
trainings for SME operators and resolved financial bottleneck that impedes
their business activity by solicitation of funding worth a total of MNT
191.4 mln (obtained from 3 different sources) supporting 44 SMEs with
interest free and low interest credits with the repayment periods from 1 to
3 years.
Under Cooperative Support Program the following major activities were
implemented.
Gave recommendations and monitored the activities of Cooperative
Developing Soums Branch Committee.
Provided MNT 3 mln worth equipment and other facilities to Uvs
Cooperative Information & Training Center enabling it to render training,
promoting and consulting services.
Organised in collaboration with Production & Services Cooperatives
Union a demo training at Hudulmuriin Shim cooperative involving 20
cooperators. The training was attended by Deputy Minister of Food &
- 38 -

Agriculture P. Ulaankhuu.
OUTCOME AND ASSESSMENT OF SPECIAL ORDER PRODUCT PROCUREMENT
ACTIVITY
Gave credits, promoted produced goods
and facilitated access to financial
sources (under 58th provision)
Business Incubator Center organised
trainings to their trainees and facilitated
access to soft loans. 2 new cellphone
operators made a successful entry to our
aimag (under 65th provision)
Organised conferences, trade fairs, and
seminars (under 66th provision)
Mineral exploration is made on the
territory of 8 eastern soums (under 86th
provision)
In accordance with Mongolian Law on
Special Permit for Economic Activity,
made references on 18 entities and
individuals, and submitted them to
respective bodies (under 87th provision)
Accumulated funds in SME Support
Fund, made it operational on sustainable
basis, and issued credits to 13 economic
entities and individuals
Organized Mineral License Holders'
Forum
Accumulated MNT 120 mln in SME
Support Fund contributing thus to "One
Village - One Product" and
"Seabuckthorn" programs supporting
local businesses
RESULT AND COMPLIANCE WITH CRITERIA
Within the framework of SME Support Program organised needed
trainings for SME operators and resolved financial bottleneck that impedes
their business activities by solicitation of funding worth a total of MNT
191.4 mln (obtained from 3 different sources) supporting 44 SMEs with
interest free and low interest credits with repayment periods from 1 to 3
years.
In partnership with aimag's Welfare Office the governorate has conducted
3 trainings on business startup and development, issued certificates that
permits economic activity to 73 people and involved some of them in the
lending program of Labour Employment Support Fund.
Mongolian TeleCom company put into operation CDMA 1900 type cell
communication network in 4 soums in 2006 and additional 2 soums next
year.
Another mobile phone operator UniTel introduced itself in Uvs aimag in
August 2007 making cheap calls possible for local residents.
Building upon the directions formulated by the national committee for
implementation of "One Village - One Product" program, devised a plan of
activities having it approved. In accordance with the plan trade fairs were
organised in soums and aimag center, successfully participated in regional
and national level fairs. At the end of the year conducted monitoring on the
activities implemented by the soums.
Redmount LLC got a license for coal exploration in Malchin soum.
In 2007, in accordance with Mongolian Law on Special Permit for
Economic Activity, the licences were issued to 5 local economic entities
for mineral exploration on 52,029 ha, and to one entity for land use on 947
ha.
In 2007, aimag's SME Support Fund, in order to set up small scale
factories fitted to local condition, has issued loans worth MNT 13.4 mln
with 1% monthly interest rate to 13 economic entities.
Organised Accountable Mining and Environmental Protection Forum for
mineral license owners discussing the following issues - current status of
mineral geological exploration and extraction activities and trends for
sustainable development of mining sector based on environmentally sound
technologies.
These forum, business meeting, discussion and its outcome aimed at
prompt implementation of Governmental Programme of Actions, action
plan of aimag governor, and newly adopted Mineral Law have attracted
over 150 participants including soum governors, chairmen of Citizens
Representative Hurals, rangers, relevant national and aimag level
professional inspectors, mineral exploration and utilization license
holders, aimag's Environmental Office led by aimag governor, and issued
recommendations to the soum and aimag government organisations,
extractive business operators, environmental inspectors and rangers.
- 39 -

MAJOR ACTIVITIES PLANNED BY AIMAG GOVERNORATE FOR LOCAL BUSINESS DEVELOPMENT
In January 2008, organised a forum of producers and cooperators, and issued
recommendations.
In August 2008, we are planning to organise Western Regional Trade Fair.
Established SME Support Fund with MNT 78 mln fund by the joint efforts and monetary
contributions from Ministry of Industry & Trade (MNT 30 mln), Has bank (MNT 18 mln),
and aimag's SME Support Fund (MNT 30 mln).
We have planned to organise a trade fair at Shar Suuri border point in late May of 2008.
MNT 20.0 billion would be invested to the construction sector.
It has been projected to set up an agricultural park in each soum as a part of agricultural
sector development efforts.
At the begining of the year 25 small tractors were supplied to the crop producers at discount
price.
In order to develop seabuckthorn processing sector, upgrade processing technology and
increase a variety of seabuckthorn products we have announced a tender on construction of
seabuckthorn processing factory with MNT 75 mln investment, and the selection process is
underway. Upon completion of this project our aimag will have a large seabuckthorn
processing facility.
The tender for construction of vegetable preserving/canning factory in Baruunturuun soum
with the investment amount worth MNT 45.3 mln has been announced.
Overview of Government support for SBT VC development
Uvs aimag has issued SBT Program on 22 December, 2005 and implementing following
activities:
Disbursed loans to 7 crop producers without interest rate through aimag SME suppport fund.
Distributed 120000 pieces of SBT seedlings brought from Russia to crop producers
In cooperation with Employment Support Fund and Ulaangom College, there were
organized SBT plantation and care trainings for 60 people in 2006 and 20 people in 2007. ,.
Had good promotion activities to encourage SBT plantation:
Published and broadcasted through local media
Broadcasted two programs each through MNTV, TV9, UBS, and TV25
Participated in a first SBT conference of Mongolia and made presentation
Aimag authorities participated and made speech in International meeting of East
Asian Local Self Governing Organization, which was held in Japan and Korea.
Published 6000 copies of "Uvs SBT" brochure and distributed it in western aimags.
Made counting and research for Hovd river SBT.
Established working relationship with Minsusk research institute of Russia and organized
collaborative scientific meeting.
- 40 -

Support for Ulaangom college
Ulaangom College is a state owned college subsidized from the state budget. They compile
90% of total budget from the state and 10% from their own farm. This year the college
started building a new expansion building with the value worth 800 mln MNT from the state
budget. Ulaangom college has following farms:
• Fruit farm
• Fruit processing farm
• Construction and plumbing service
• Vegetable production
• Income from Labor and Social welfare office short term trainings
According to the vice director Naranbileg, besides this 90% state subsidy they don't get any
support from the Government.
Support for Business incubation
Business incubator center is also a not for profit, by organization of Ulaangom College and
provides state services. They get 20-mln MNT subsidy from the state per year and their
administrative budget is covered by Ulaangom College. Usually they collaborate and
coordinate its activities with Labor and Social welfare service center and Ulaangom College.
They do not get any other support from the Government, said manager Tsetsegmaa.
- 41 -

Annex II: Registered businesses in Uvs Aimag
Soum
Total
Forms of liability
SHC LLC Partnership* Partnership** Coop SOC LOC Branches Rep
Baruunturuun
Buhmurun
Davst
Zavhan
Zuungobi
Zuunhangai
Malchin
Naranbulag
Ulgii
Umnugobi
Undurhangai
Sagil
22 5 6 0 0 10 0 0 1 0
4 0 0 0 0 1 1 0 1 0
3 0 1 0 0 1 0 0 1 0
7 0 4 0 0 2 0 0 1 0
11 0 1 0 0 8 0 0 1 0
6 0 4 0 0 1 0 0 1 0
10 0 1 0 1 7 0 0 1 0
7 0 3 0 0 2 0 0 1 0
7 0 2 0 0 3 0 0 1 0
11 0 4 0 0 6 0 0 1 0
12 0 5 0 0 6 0 0 1 0
5 0 1 0 0 3 0 0 1 0
Tarialan 8 1 2 0 0 4 0 0 1 0
Turgen 13 0 3 0 0 8 0 0 1 0
Tes 16 0 6 0 0 8 0 0 1 0
Hovd 10 0 3 1 1 4 0 0 1 0
Hyargas 9 0 3 0 0 4 0 0 1 0
Tsagaanhairhan 7 0 3 0 0 3 0 0 1 0
Ulaangom 232 8 138 12 2 54 1 2 14 0
Tax offices 17 3 3 0 0 1 0 0 10 0
TOTAL 417 17 193 13 4 136 2 2 42 0
ACRONYMS: SHC Shareholding Company; LLC Limited Liability Company; Partnership* All members have a full liability; Partnership** Some members have full
liability; Coop Cooperative; SOC State owned company; LOC Locally owned company; Rep Representative office.
- 2 -

No Economic Sectors LLC
Partne
rship*
Partne
rship*
*
Coop SOC LOC Branch Rep State
Inst
Nonstate
org
Religious
1 Construction 19 0 0 1 0 0 1 0 0 0 0 21
2 Wholesale & retail trading 115 3 2 108 0 0 4 0 0 0 0 232
3 Education 4 0 0 1 0 0 0 0 2 0 0 7
4 Processing factories 29 0 0 55 0 0 2 0 1 1 0 88
5 International organizations 0 0 0 0 0 0 0 0 0 1 0 1
6 Fishery 1 0 0 1 0 0 0 0 0 0 0 2
7 Hotel, restaurant 16 0 0 12 0 0 1 0 0 0 0 29
8 Real estate & leasing 16 1 1 4 0 1 2 0 3 1 0 29
9 Financial institutes 7 0 0 5 0 0 19 0 0 1 0 32
10 Public management, Defence, Social Security 0 0 0 4 0 0 2 0 4 1 0 11
11 Transportation, Storage, Communication 6 0 0 3 0 0 2 0 0 0 0 11
12 Mining and natural resources 0 0 0 1 0 0 0 0 0 0 0 1
13 Public, Community, Personal Services 3 0 0 3 0 0 1 0 7 4 1 19
14 Agriculture, forestry, hunting 48 3 0 190 0 0 1 0 0 1 0 243
15 Power, Heating 4 0 0 0 1 0 0 0 0 0 0 5
16 Health and social welfare 13 6 0 9 0 0 0 0 1 1 0 30
Total
- 3 -

Annex III: Herder Households in Uvs Aimag
Soum
HH
TOTAL
# of
family
members
# Livestock
HH
Number of livestock
0-10 11-30 31-50 51-100
#
members
# livestock
HH
#
members
# livestock
HH
#
members
# livestock
HH
#
members
# livestock
Baruunturuun 519 2122 41702 97 366 537 121 499 2425 83 332 2869 104 407 7767
Buhmurun 507 2032 79970 23 110 119 45 185 962 46 182 1817 98 357 7774
Davst 353 1579 80609 38 144 158 22 81 447 13 50 518 49 174 3660
Zavhan 473 1768 79828 15 42 69 40 132 908 31 110 1282 81 300 6259
Zuungobi 594 2616 120690 28 108 155 54 190 1127 38 171 1505 85 366 6503
Zuunhangai 658 2634 129680 14 61 86 48 150 1056 50 182 1946 119 455 8771
Malchin 671 2839 129753 11 133 54 42 132 890 48 73 1958 113 433 8652
Naranbulag 1053 4403 174741 45 118 275 95 342 2008 98 406 4027 164 616 11945
Ulgii 574 2560 99121 41 160 253 66 271 1372 50 219 2067 90 361 6663
Umnugobi 986 4080 159792 42 226 218 87 369 1758 100 333 3976 192 711 14240
Undurhangai 804 3176 158844 28 109 142 77 266 1527 68 252 2741 138 500 10224
Sagil 521 2113 144554 25 91 122 34 132 656 29 90 1161 56 212 4060
Tarialan 989 4530 133650 56 194 281 131 456 1989 100 438 4095 216 994 17633
Turgen 437 1978 93544 15 61 116 36 156 704 34 125 1423 71 273 4462
Tes 1346 5842 238951 50 165 310 116 362 2353 100 356 4050 231 905 17115
Hovd 618 2392 95847 17 30 120 63 182 1261 53 175 2196 120 432 9008
Hyargas 596 2518 146664 17 64 79 41 145 887 37 101 1542 74 290 5532
Tsagaanhairhan 596 2341 126413 33 120 199 65 216 1227 48 172 1786 81 304 6532
Ulaangom 1691 7348 147476 387 1464 1979 293 1264 5605 191 835 7654 309 1332 22183
TOTAL 13986 58871 2381829 982 3766 5272 1476 5530 29162 1217 4602 48613 2391 9422 178983
- 4 -

Soum
HH
Number of livestock
101-200 201-500 501-999 1000-1499 1500-2000 > 2001
#
members
# livestock
HH
#
members
# livestock
HH
#
members
# livestock
HH
#
members
# livestock
HH
#
members
#
livestock
HH
#
members
#
livestock
Baruunturuun 68 288 9426 38 181 11093 5 28 2955 2 13 2442 1 8 2188
Buhmurun 171 575 24353 107 505 32456 12 87 7221 5 31 5268
Davst 77 398 10539 114 540 34188 29 137 18782 11 55 12317
Zavhan 149 549 21032 143 566 40161 12 57 8007 2 12 2110
Zuungobi 155 674 22749 195 895 59691 33 188 21732 5 19 5708 1 5 1520
Zuunhangai 208 820 30323 173 732 53934 38 178 23895 6 44 6337 2 12 3332
Malchin 187 769 26563 247 1161 75711 18 105 10588 5 33 5337
Naranbulag 332 1402 44994 280 1296 82150 34 196 22972 3 12 3052 2 15 3318
Ulgii 157 577 21810 133 751 40190 30 176 18626 7 45 8140
Umnugobi 296 1214 43156 233 1024 67289 25 147 16788 10 52 10678 1 4 1689
Undurhangai 195 736 29522 247 1069 75667 35 166 21362 16 78 17659
Sagil 103 415 15474 188 770 60537 74 339 48823 11 58 11712 1 6 2009
Tarialan 255 1202 36811 204 1048 54682 21 157 10948 5 32 5390 1 9 1821
Turgen 111 504 17866 129 650 41252 38 195 24142 3 14 3579
Tes 405 1846 58769 379 1847 110231 52 286 29886 12 72 14614 1 3 1623
Hovd 216 910 30726 129 589 37977 16 52 10236 4 22 4323
Hyargas 156 641 22756 207 932 62767 38 208 23154 25 134 27744 1 3 2203
Tsagaanhairhan 160 598 21615 151 646 47351 40 185 25876 17 97 18828 1 3 2999
Ulaangom 324 1529 47134 168 828 48451 13 66 7589 6 30 6881
TOTAL 3725 15647 535618 3465 16030 1035778 563 2953 353582 155 853 172119 8 48 13303 4 20 9399
- 5 -