His Excellency Mr' Dalrain Davaasambuu

1
His ExcellencyMr. Dalrain Davaasambuu

• Ambassador to the United Kingdom of Mongolia
• Mongolia in 2036 How to profit from the rise
• of an economic superpower

2
Mongolia in 2036 How to profit from the rise of
an economic superpower

• The ideas in this presentation are not those of
  the Mongolian government but personal thoughts
  and calculations of Mr Davaasambuu based on
  existing official statistics. Presently, the
  Mongolian government has no official 30-year
  strategy.

3
Double transition since 1990 Political and
economic reforms

• Several changes of government since 1990. Today,
  five parties are represented in Parliament four
  parties are in the Cabinet
• Mongolians are enjoying fundamental human rights,
  democracy and freedom of information
• Democracy and rule of law have been achieved,
  despite a low level of economic development
  Democracy Without Prerequisites See Steven Fish
  (1998), Mongolia Democracy without
  Prerequisites, in Journal of Democracy (9) 3
  (July), 127-141.
• Political and economic reforms occurred at the
  same time. Private sector produces gt70 of GDP
  due to the privatisation of state enterprises and
  economic reforms since the centrally planned and
  command economic model was abandoned in the early
  1990s

4
Economy now and 2036

• Now
• GDP xx billion
• Per capita GDP 721
• Ínformal economy in of GDP 30-40
• Population 2,6 mio.
• Exports 950 mio.
• Imports 1,100 mio.

• Thirty years from now
• 10,000
• 5-10
• 3,7 mio.
• 15,000 mio.
• 14,500 mio.

private estimate including informal economy
5
Development Basis and Strategy

• Landlocked and vulnerable
• Small landlocked country between two big
  neighbours
• High economic vulnerability according to UNDP
  ranking. Dependence on small number of
  commodities (copper, gold, cashmere)
• The China Factor
• Few competitive advantages in manufacturing vs.
  China
• Chinas economic rise increases demand for metals
  like copper

• Strategy
• Promote export oriented economy with high
  diversification (AsiaEuropeAmerica)
• Strengthen industries with low transport costs
  that use locally available raw materials
• Use duty-free access to EU
• Establish status as transit country for energy
  and goods
• Develop tourism, agriculture and produce some
  value added goods
• Exploit Mongolias rich natural ressources with
  the help of foreign direct investment
• Invest in infrastructure
• Look for opportunities in knowledge-based sectors

6
A small but growing population

• From 1950 to 1990, the population almost tripled
  to 2,7 mio. now
• In the transition period 1989-2000, population
  growth droped to 1.4 from 2.5 in 1979-1989.
  This reflects the enormous socio-economic
  changes.
• Estimates suggest that the Mongolian population
  will amount to 3,6 mio. in 2035
• Research indicates that population growth will
  drop below the replacement level around 2025
  (less than 2,1 children per woman)

7
A new life for herdsmen

• Non-intensive herding suits Mongolias natural
  conditions. Carrying capacity of the steppe
  limited to 30-40 mio. livestock
• 10 of the population will live as herdsmen in
  2036, from 15 now. (410,000 herders then,
  370,000 now)
• Living arrangements will converge towards
  developed nations model, for example 30 of
  herders households have TV now all will have a
  TV in 2036

8
Tourism can make a big difference

• Tourism created 5 of Mongolias GDP in 2004
• 25 annual increase in income from tourism over
  the past five years
• Amount of visitors doubled to 305,000 from 2000
  to 2004
• If Mongolia maintains a 10 annual increase over
  30 years, we will have 4 mio. visitors in
  2036 (population size)

9
Gaining from transit

• Mongolia plays an important role for the transit
  of goods and people between China, Russia, Europe
  and Asia at large (road, air, pipelines)
• Energy from Russia to China could go through
  Mongolia (increased by rising importance of
  renewable energy, eg hydroenergy from Russia)
• Route for trade in goods to Russia (Provide
  related service and gain access)
• Need to develop infrastructure and transport
  industry

10
Digging for development

• Mongolia is rich in resources Copper, gold,
  iron, coal, phosphate etc.
• Recent commodity price boom makes Mongolias
  future more bright and promising Foreign
  investment has started, but development of mining
  stakes takes time (15 years or more)
• Global underinvestment in metals, despite
  megatrend of rising demand (caused by economic
  rise of China)
• Proximity to China as a big advantage (low
  transport cost)

11
Economic impact of mining

• Copper and gold deposits at Oyu Tolgoi, exploited
  by Canadian company Ivanhoe Mines, could start
  operation in 2-3 years
• Over gt35 years, 15 mio. t of copper and 11 mio.
  oz. of gold
• At 2005 prices, the value of exports from this
  mine project alone exceeds US 54 billion
• Ivanhoe estimates 34,3 annual increase in real
  GDP and 9,3 increase in nationwide consumer
  expenditure

12
International support

• Historically good relations to Russia, because of
  Russias role in optaining national independence
  in 1921 and supporting modernization for 70 years
• China becomes Mongolias largest trading partner
  and source of FDI
• Developed democracies as trading partners and
  providers of development assistance (G7 protocol
  first mentionned support for Mongolias reforms
  at 1991 London meeting)
• US president George Bush expressed support for
  Mongolia on his visit in November 2005

13
Summary 800 years of statehood

• In 1206, Chinggis Khan united the Mongolian
  tribes and established a Mongolian state
• Independence in 1921
• Successful double transition since 1990
• Profiting from Chinas economic rise
• In 2036, Mongolia will celebrate 830 years of
  statehood. To get an idea of what that will be
  like, please come to our country and attend the
  800-year celebrations taking place throughout
  2006.