Meteoric Mongolia
Why It's Ascending So Fast -- And How It Might Fall
Article Summary and Author Biography
Mongolia enjoys one of the fastest-growing economies in the world. But the dramatic increases in the country's GDP are riddled with ambiguity, as widespread corruption and an unsustainable dependence on mining raise questions for the future. Absent better planning and more government regulation, Mongolia's problems will only worsen.
MORRIS ROSSABI is Distinguished Professor of History at Queens College at the City University of New York and Adjunct Professor of Inner Asian History at Columbia University.
Snapshot
Mongolia is one among a small handful of places left in the world with major untouched mineral deposits. But investing successfully in its mining industry demands more than just money and a willingness to take risks; it requires understanding the country's vulnerable geography and byzantine political environment.
This article is the first installment of a five-part series examining the world's fastest-growing economies, according to the IMF World Economic Outlook.
Mongolia's Oyu Tolgoi mine. (Courtesy Reuters)
While Western economies have struggled to achieve two percent annual GDP growth of late, Mongolia has tallied rates well into two digits. After the Mongolian economy contracted 1.3 percent in 2009 -- the height of the recession -- it grew by 6.4 percent in 2010, and then by an astonishing 17.3 percent in 2011. And the stellar performance has only continued: The International Monetary Fund (IMF) estimates that Mongolia's GDP increased by 12.7 percent in 2012. The IMF projects a growth rate of 15.7 percent in 2013. All this makes it the world's fifth-fastest growing economy. But these jaw-dropping figures conceal deeper economic dislocations.
At first glance, Mongolia's recent performance contrasts sharply with the country's economic malaise in the early 1990s. After the collapse of the Soviet Union, the withdrawal of aid from Moscow and the decrease in trade with the Soviet bloc led to a precipitous economic decline, prompting Ulaanbaatar to seek assistance from international financial agencies. The "shock therapy" prescribed by the IMF and the Asian Development Bank, which consisted of privatizing companies, minimizing government, eliminating subsidies, liberalizing trade, and enacting austerity measures, exacerbated Mongolia's difficulties. Unemployment, poverty, corruption, and the attendant social problems afflicted Mongolia throughout the 1990s and into the next decade...
