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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005
MONGOLIAN STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Politic and Economic Environment:
In the second half of the 1990s, privatization
of the larger enterprises began to accelerate
and many of these were sold for cash to
foreign investors. In 1998 and 1999, more
than 50 large companies were sold and
hundreds more small companies were
organized from state-owned assets and sold
off. But, in the run-up to the parliamentary
elections of 2000, support for the reforms,
which implied substantial disruption of
traditional labor employment patterns, ran
down. By then, the world economy was
slowing and the appetite of foreign investors
for assets in countries like Mongolia was
decreasing. Accordingly, only nine large
enterprises were sold in 2000 and just one in
2001. Some of the best assets were still in
the process of being sold off in 2002.
Mongolia’s privatization program has
successfully progressed through 2004, and
the private sector now accounts for 85% of
the economy. Agriculture Bank and, Mongol
Daatgal, Mongolia’s largest insurance
company were privatized in 2003. NIC, an oil
company, was also privatized early in 2004.
In June 2003, shortly after assuming his new
political role, Chinese President Hu Jintao
arrived in the Mongolian capital of Ulan Bator
Key Information Contacts
Parliament of Mongolia www.parl.gov.mn
Ministry of Finance www.mofe.pmis.gov.mn
The Central Bank of Mongolia www.mongolbank.mn
Mongolian Chamber of Commerce & Industry www.mongolchamber.mn
National Statistical Office of Mongolia www.nso.mn
ECONOMIC RATIOS
Domestic
savings
PAGE 104
Mongolia
Lower-middle-income group
Trade
Indebtedness
Investment
for talks with the Mongolian government. The
trip was aimed at reaffirming the close
bilateral relationship between Mongolia and
China. A year later in June 2004, in
parliamentary elections in Mongolia, early
results suggested that the main contest
would be between the ruling MPRP and the
Motherland Democratic Coalition (MDC). In
August 2004, Tsakhia Elbegdorj was
appointed to the post of prime minister by
the country's Great Hural. Born in 1963,
Elbegdorj was a member of parliament and
the vice parliamentary speaker from 1996 to
2000, and served briefly as prime minister
before this appointment in 2004. Although
Elbegdorj was aligned with the MDC, he was
expected to form a coalition government with
the MPRP.
Economic Performance:
GDP grew 5% in 2003, up from 3.9% growth
in 2002, due to a 4.5% increase in
agricultural output and a buoyant services
sector. Agriculture, recording the first rise in
output since 1999, as weather conditions
improved after several extremely harsh
winters. Growth in crops was very strong,
while livestock and animal husbandry
increased slightly. Fiscally speaking, the
deficit narrowed to 3.6% of GDP from 5.6%
in 2002, after the government implemented
GROWTH OF INVESTMENT AND GDP
(%)
12
10
8
6
4
2
0
-2
97
GDI GDP
the Public Sector Management and Financial
Law, which streamlined cash management
and bolstered spending accountability.
Foreign funding typically covers about 70%
of the deficit. Total external debt stood at
US$ 1.1 billion at year-end 2003, or 91% of
GDP.
Merchandise exports rose 14.5% as
compared to a 3.9% decline in 2002 due to
higher demand for commodities such as
gold, copper, and cashmere. Imports also
rose by 14%, leading to a widened trade
deficit. However, due to a strengthening of
the balance of payments surplus resulting
from foreign remittances of around US$ 78
million in 2003, and FDI inflows increasing
94% due to gold prospecting, the current
account deficit narrowed to 14.7% of GDP
from 16% (not including grants). Aid grants
from multilateral agencies allowed Mongolia
to build its international reserves to more
than US$ 240 million by year-end 2003. Aid
grants also play a significant role in reducing
the current account deficit from what it would
be solely on the basis of private current
transactions. 1
1 Economic and Political Overview, County Watch
Incorporated, 2005
98 99 00 01 02 03
* World Bank reports