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The Mongolian energy sector faces mounting difficulties, with infrastructure dating back to the Soviet era and increasing energy demand surpassing installed capacity. The Government of Mongolia has begun implementing energy sector reforms, including significant increases in electricity tariffs. However, there is a lack of studies assessing the impact of these changes on inflation and household living costs. This study fills this void by estimating the heterogeneous impact of energy subsidy removal on inflation and household living costs using a behavioral microsimulation model based on the Household Socio-Economic Survey and the Input-Output Table data. Our findings reveal that current electricity subsidies disproportionately benefit richer households. The complete removal of these subsidies will impose an additional 3.4 % burden on the poorest decile, compared to 1.8 % on the richest decile, while the average increase in household expenditures will be 2.7 %. Eliminating these subsidies could increase poverty rates and economic inequality. Interestingly, the government's policy of moderately increasing household electricity prices, shifting some of the burden to the industrial sector, and maintaining subsidies for heating and briquettes still imposes a comparable burden on household expenses. Although this policy framework reduces the financial burden on low-income populations, it unfairly impacts the livelihoods of rural populations, particularly herders, who do not benefit from energy subsidies, by fueling overall inflation. To mitigate these adverse effects, we recommend targeted support measures for vulnerable populations.
Dzud, a harsh winter and spring event that leads to high livestock mortality, has become increasingly recurrent in Mongolia due to climate change, causing substantial damage despite ongoing adaptation and mitigation efforts. This study analyzes the impacts of dzud on rural herder household livelihoods across Mongolia by utilizing a constructed province-level panel dataset from 2009 to 2023. The effects are estimated using a two-way fixed effects regression with an instrumental variable to account for potential endogeneity of migration. We find three main results. First, dzud events have an immediate and adverse effect on rural herder household real income and expenditure, with livestock income particularly vulnerable. Second, when heterogeneity is considered, middle-income households are affected the most, and households headed by individuals under the age of 35 experience larger income declines compared to those headed by older individuals. Third, dzud events’ impact on income inequality for herder households is not significant since its estimate is not robust. These findings underscore the differential vulnerability of herders to climatic shocks and highlight the need for policies that mitigate the economic consequences of such extreme events.
Dzud is an extreme weather event in Mongolia characterized by harsh winter and early spring conditions that severely restrict livestock survival and lead to widespread losses. It manifests in multiple forms, all of which reduce the availability of forage. Heavy snowfall can accumulate and compact, preventing livestock from accessing forage; this is referred to as “white” dzud. In late winter and early spring, rising temperatures can melt snow, while sudden drops in temperature can create ice layers over pasture vegetation in a very short period, making grazing impossible. This phenomenon is known as “iron” or “ice” dzud.
1 The heterogenous impact of energy subsidy reform: The ill targeted nature of energy subsidies in Mongolia Manlaibaatar Zagdbazar1, Economic Research Institute, Mongolia Tuvshintugs Batdelger 2, National University of Mongolia and Economic Research Institute, Mongolia Abstract The Mongolian energy sector faces mounting difficulties, with infrastructure dating back to the Soviet era and increasing energy demand surpassing installed capacity. The Government of Mongolia has begun implementing energy sector reforms, including significant electricity tariff increases. However, there is a lack of studies assessing the impact of these changes on inflation and household living costs. This study fills this void by using a microsimulation model based on the 2023 Household Socio-Economic Survey and the 2019 Input-Output Table to analyze the heterogeneous impact of energy subsidy removal on inflation and household living costs. Our findings reveal that current subsidies disproportionately benefit wealthier households, with complete subsidy removal increasing household expenditures by 2.0% on average. The poorest decile faces a 2.4% burden compared to 1.4% for the richest decile. Eliminating these subsidies could increase poverty rates and economic inequality. Interestingly, the government's policy of moderately increasing household electricity prices, shifting some of the burden to the industrial sector, and maintaining subsidies for heating and briquettes imposes a similar burden on household expenses. Although this policy framework reduces the financial burden on low-income populations, it unfairly impacts the livelihoods of rural populations, particularly herders, who do not benefit from energy subsidies, by fueling overall inflation. To mitigate these adverse effects, we recommend targeted support measures for vulnerable populations.
Despite global uncertainty, Mongolia's new government is working to maintain economic growth which is fuelled by strong export performance and fiscal expansion. But structural challenges such as the severe contraction of the agricultural sector due to harsh weather conditions, potential disruptions resulting from factors such as petroleum supply from Russia, a slowing Chinese economy and increased budget spending could test the country's resilience.
To shift away from fossil fuel subsidies and ensure a just energy transition, it is crucial to carefully study the impact of fossil fuels subsidies to households and determine the magnitude of this transition. This is particularly relevant for countries like Mongolia, where coal-fired plants account for more than 90% of electricity production and about 70% of total households use coal for heating. It is surprising that there is a lack of comprehensive studies measuring the extent of fossil fuels subsidies and assessing their impact on environment, society, and economy in Mongolia. This study examines the distributional effects of fossil fuel subsidies in Mongolia, focusing on their impact on income inequality and vulnerable populations. Using a microsimulation model based on the 2023 Household Socio-Economic Survey (HSES) and the Input-Output Table 2019, we analyze the direct and indirect consequences of removing these subsidies. Our findings reveal that fossil fuel subsidies in Mongolia are regressive, disproportionately benefiting wealthier households. The elimination of these subsidies would have significant economic and social implications, including a potential increase in poverty rates. While the government could consider a more moderate approach of gradually increasing energy prices, this would still have indirect economic costs. To mitigate the negative impacts of subsidy reform, targeted support measures for vulnerable households and investments in alternative energy sources are essential. A carefully planned transition away from fossil fuel subsidies can help ensure a more equitable and sustainable future for Mongolia.
In a broad sense, social license to operate refers to the ongoing acceptance of a company’s or industry’s standard business practices and operating procedures by its employees, stakeholders, and the general public. In Mongolia’s case, obtaining a social license has become just as relevant as on the international level. There have been several instances where mining developments have been delayed, interrupted, or even shut down due to opposition from the public and/or local communities. These hindrances can be extremely costly for mining companies; therefore, obtaining and maintaining a social license is crucial. In this study, we review cases of social license to operate in Mongolia and compare them with similar experiences in other countries. In particular, this study reviews related studies on the social license to operate and international and domestic cases that reflect successful and unsuccessful developments of social license. The key findings of the study are: (i) the grievances from communities push the government to address issues related to social license; (ii) despite the number of mining companies operating in Mongolia, only a few have implemented measures aimed at obtaining a social license to operate; (iii) it is essential to improve the understanding of social license to stakeholders, improve transparency, and strengthen the enforcement of laws in the mining sector to achieve long-term policy goals; (iv) regular and local social acceptance surveys can help to identify and address any potential issues with social license.
At the onset of Russia’s invasion of Ukraine, it was widely expected that the war would have a profoundly negative impact on the Mongolian economy. Mongolia is Russia’s direct southern neighbour and its economy significantly depends on the import of strategically important goods from Russia.
The Mongolian economy is heavily dependent on the mining sector. Mongolia’s primary commodity prices for export experienced significant adjustments in past years and are generally not expected to increase in the near future. Therefore, we looked at substantial adjustments in the prices of our major commodities as a source of external shocks to the economy. Since macroeconomic variables are intrinsically interconnected and can be affected by various internal and external factors, the research team conducted an analysis within a general macroeconomic framework to explain these interactions with an emphasis on the internal consistency of arguments. Moreover, past experiences suggest that economic volatility from these shocks is greatly exacerbated by macroeconomic policy decisions. Therefore, we also reviewed the current developments in macroeconomic policymaking and their impact on the economy with particular attention to debt sustainability.
It is widely accepted that the resource sector does not necessarily benefit the country at a national level. At a local level, the picture is different. Studies suggest that locally, at the district level, or in geographically close areas, mining can positively impact household livelihood. In this study, we show that mining positively affected the livelihood of provincial households in miningproducing provinces using the countrywide data from Mongolia. We identified mining-producing provinces using provinces’ mining production level, and based on this identification, we assessed the impact of mining at the provincial level. It should be noted that this effect is significant in producing provinces only and that mining activities do not necessarily improve the livelihood in all provinces.
Энэ судалгаанд ҮСХ-ны Өрхийн нийгэм эдийн засгийн судалгааны анхдагч тоон мэдээллийг ашиглан 2002-2018 онд Монголын дундаж давхарга тэлсэн эсэх, дундаж давхаргын дүр төрх хэрхэн өөрчлөгдөж ирснийг тодруулахыг зорьсон. Нийгмийн ухаанд дундаж давхаргыг тодорхойлох тогтсон нэг шалгуур байдаггүй бөгөөд тухайн судалгааны зорилгоос хамаарч янз бүрийн тодорхойлолт ашигладаг. Бид энд өрхийн орлогод үндэслэсэн хэд хэдэн тодорхойлолт ашиглаж бага, дундаж, өндөр орлоготой бүлгүүдийн эзлэх хувийн урт хугацааны өөрчлөлтийг хэмжсэн. Мөн энэ тодорхойлолтуудаас Монголын дундаж давхаргыг илэрхийлэхэд сайн тохирох нэг шалгуурыг сонгон, түүгээр тодорхойлогдох орлогын бүлгүүдийн хэв шинж урт хугацаанд хэрхэн өөрчлөгдсөнийг харьцуулж харууллаа.
The study aims to prepare a baseline document to develop guidelines for the SLO and develop a social licensing evaluation methodology to promote sustainable mining development. The guideline was first completed based on an extensive literature review and international examples, mainly from Australia. Then, we created a sample questionnaire using the guideline and used the questionnaire to assess the SLO of a local silver mine. The findings from this survey and the challenges associated with conducting the survey were analyzed and used to further improve upon the guideline. The survey result shows that the frequency of contact with company personnel, procedural fairness, and perceived impact on social infrastructure affect community acceptance and approval by increasing or decreasing trust in the company. Our result confirmed trust as a strong and significant predictor of acceptance and approval of the company and mining project. Our findings are similar to Moffat and Zhang (2014) and other international studies.
In this study, we reviewed Mongolia’s and major GHG emitting countries’ experiences towards carbon reduction and their strategies in meeting their NDCs to achieve net-zero emissions. We also quantitatively assessed the long-term economic and environmental impact of a shock generated by the carbon-neutral policy in Mongolia. As for the quantitative assessment, we developed a Computable General Equilibrium (CGE) model based on the recursive dynamic CGE model for estimating the long-term economic impact of emission reduction policies in the coal sector. Using the model, we will project long-term economic development and CO2 emissions under the four alternative scenarios. In addition, the environmental impact is measured by CO2 emissions of sectors. Finally, we proposed policy recommendations and strategies to decrease the economic dependency on the coal sector and move towards a green technology-based economy.
Third, the Mongolian economy has already successfully entered interesting niche markets abroad, including in promising services such as engineering services for the mining industry. Mongolia’s geographical location, often seen as a millstone holding the country back, places it on the doorstep of the world’s most dynamic large economy of the last 30 years. This creates unending economic possibilities and opportunities. Further efforts are needed to capitalize on these advantages through a long-term regional cooperation and integration strategy. Diversification is an important part of the strategy, but it will take time and should be complemented by other policies, including xii Foreword macroeconomic policies that can reduce Mongolia’s vulnerability to fluctuations in commodity prices in the short run. Diversification can only succeed if the government facilitates international trade. Export and import procedures need to be further simplified. In order to meet international standards, firms need to have better access to internationally accredited laboratories. ADB has been supporting those activities, most recently by modernizing border crossing points and strengthening laboratory standards. These efforts will help to ease trade and give large and small firms the opportunity to access foreign markets more easily.
Most studies in Mongolia focuses on the relationship between FDI inflow and economic growth. Generally, FDI inflow inspires growth; however, it can also have a negative impact on some sectors. In Mongolia’s case, FDI inflow is highly dependent on the mining sector – specifically, large mining projects. Unfortunately, until recently, FDI inflow in Mongolia has been declining, reaching negative $4.2 billion in 2016. This research aims to address two important questions with regard to FDI inflow in Mongolia. First, we identify main causes of FDI fluctuations and secondly we estimate the impact of FDI on the economy. Currently and historically, the main determinant of FDI inflow in Mongolia is mineral commodity prices, which we observed from data from Mongolia as well as of other countries with an abundance of mineral resources. Moreover, we show that the investment and business climate also had a dramatic impact on the FDI inflow in Mongolia. The impact of FDI inflow on the economy differ depending on how the inflow is allocated to sectors and what percent of it is absorbed in domestic market. According to results of our stimulations, the impact of FDI inflow is more significant as more is absorbed by the domestic market. Historically and currently, over 70 percent of FDI inflow has been allocated to the mining sector, which is capital intensive, but lacks domestic absorption capacity. Thus, in terms of policy making, Mongolia should focus on developing the manufacturing sector which serves the mining sector.
Дундаж давхарга гэдгийг ерөнхийдөө нийгмийн шатлалаар авч үзвэл дундаж шатлалд хамрагдах хэсэг бүлэг гэж ойлгож болно. Энэхүү дундаж давхаргыг тодорхойлох тогтсон тодорхойлолт, хэмжүүр хараахан үгүй бөгөөд олон улсад дундаж давхаргыг орлогоор, хэрэглээгээр, хөрөнгөөр, амьдралын хэв маягаар, сэтгэлгээгээр гэх мэтээр олон янзаар тодорхойлж байна.
