Discusses key economic indicators and trade statistics, which countries are dominant in the market, the U.S. market share, the political situation if relevant, the top reasons why U.S. companies should consider exporting to this country, and other issues that affect trade, e.g., terrorism, currency devaluations, trade agreements.
Last Published: 8/8/2017

The variation over time in the quantitative values of Mongolia's key economic indicators and trade statistics captures the dramatic difference between the country's decidedly positive medium-to-long-term prospects as an investment destination and its less rosy short-term prospects.  

Over the past decade, Mongolia's GDP has increased by 223 percent ($3.41 billion in 2006 versus $11.03 billion in 2016), its GDP per capita has increased by 231 percent ($1,134 to $3,754), its poverty rate has dropped from 37 percent to 22 percent, and its inflation rate has dropped from an annual average of 23 percent to 3.4 percent in April 2017.  The factors responsible for this impressive record ― including tremendous mineral reserves, agricultural endowments, proximity to the vast Asia market, and an educated labor force ― remain in place and bode well. 

Since 2011, however, the numbers suggest a disconcerting trend.  Foreign direct investment (FDI) into Mongolia has steadily decreased from a high of $4.7 billion in 2011, reaching only $218 million in 2016.  (Note:  The 2016 FDI figure excludes the offsetting transactions of the $4.3 billion proceeds of the Oyu Tolgoi mega copper/gold mine project financing composed of a drawdown of project financing loans and shareholder loan repayments.  End note).  GDP growth has similarly declined since 2011 (17.3 percent to 1.0 percent), the official unemployment rate has increased from 4.8 percent to 9.1 percent, and public sector debt as a percentage of GDP has ballooned from 33 percent to 93 percent over the period from 2011 to 2016.  Although some factors responsible for this steep downturn are beyond Mongolia's control (global commodity prices, China’s economic slowdown), others were self-imposed (FDI-discouraging legislation, capricious corporate tax levies, prosecutions of dubious merit of foreign business executives). 

Against this backdrop, the new majority government, elected in June 2016, has taken some encouraging steps.  First, the U.S.-Mongolia Agreement on Transparency in Matters Related to International Trade and Investment, or Transparency Agreement, went into effect on March 20, 2017.  Warmly welcomed by U.S. and foreign investors alike, it will establish clear processes for drafting and commenting on new legislation and regulations and require strict transparency related to laws involving trade and investment. 

Second, in May 2017 the the International Monetary Fund (IMF) approved an agreement with the Mongolian government on a comprehensive $5.5 billion relief package that will not only begin addressing Mongolia’s large public debt, but also bring with it necessary discipline and budget reforms, as well as an in-depth review of banking assets.  The IMF-led agreement has enabled the government to refinance international bonds that came due in March 2017, a more attractive and politically palatable alternative to relying exclusively on Chinese financing. 

While the IMF program’s budget tightening will initially dampen economic growth, the government has committed to reform its fiscal and borrowing practices, improve its banking sector, and complete long-delayed regulatory reforms that should put it on a path toward long-term, sustainable economic growth. 

China and Russia, Mongolia's only contiguous neighbors, dominate the Mongolian market.  More than 90 percent of Mongolian exports are shipped to or through China; Russia provides 90 percent of Mongolia’s refined petroleum products and 20 percent of its electrical power.  

Mongolia exported $4.05 billion in goods and services in 2016 ($4.03 billion in 2015) and imported $3.45 billion ($3.87 billion in 2015).  U.S. companies exported $55.6 million in goods and services to Mongolia in 2016 ($69.2 million in 2015) and imported $11.2 million ($17.3 million in 2015).  Accordingly, the U.S. share of total Mongolian trade amounts to slightly more than one percent of all Mongolian imports.

Top Five Reasons Why U.S. Companies Should Consider Exporting to Mongolia:

  1. Proximity to regional markets with three billion consumers.

  2. A pro-western government actively seeking to diversify its economy.  

  3. No onerous restrictions on repatriating profits and other funds.

  4. Relative ease of establishing a business.

  5. An educated and trainable work force.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



Mongolia Trade Development and Promotion