Democracy and Governance in Mongolia
The Development Challenge: Mongolia's harsh climate, small domestic market, land-locked status, and lack of infrastructure present formidable challenges. Yet the country provides an important example to others in East Asia, Central Asia, and elsewhere on how to manage an economic transition within a democratic political framework.
Mongolia's transition to democracy is a remarkable achievement with ramifications that go well beyond its frontiers. Ten elections have been held over the past decade, three each at the local and presidential levels and four at the parliamentary level. Governments have been chosen through elections that reflect the will of the people, and the transition from one government to the next has taken place in a largely positive and cooperative atmosphere. The most recent Parliamentary elections, held in June 2004, further demonstrated the country's progress toward democracy. In that election, the Motherland Democracy Coalition (MDC), which previously had held just four of the 76 seats in Parliament, won 34 seats against the 36 captured by the Mongolian People's Revolutionary Party (MPRP), the reformed Communists who had governed the country for all but four of the 14 years since the transition from socialism began in 1990. The MDC and MPRP now share power in a de facto coalition, with the MDC holding the Premiership and the MPRP the Speakership. Yet, important challenges remain. The judiciary and civil society remain weak, corruption remains high, public access to the decision-making process is limited or nonexistent, the Parliament has yet to emerge as an effective overseer of the executive branch, and the participation of women in the political process is strikingly low (women hold only five seats in Parliament, for example, and none of the 21 regional governorships).
The direction and pace of economic change also have been encouraging. Approximately 75% of the Mongolian economy is now in private hands, up from virtually nothing at the beginning of the 1990s. Total annual gross domestic product (GDP) is estimated at just over $1 billion and per capita income is estimated at around $500 per year. Tourism, construction, and light industry offer significant future potential, while international investor interest in mining increased significantly over the past year.
After several years of economic stagnation and decline, GDP growth rates reached 3.9% in 2002 and 5.6% in 2003. This encouraging development suggests that Mongolia's hard-won political stability is beginning to have an economic impact. A vibrant "underground" economy and informal "remittances" from the estimated 70,000 Mongolians working overseas may make the actual per capita income figure even higher, but the poverty rate remains high at 33%. The growing international debt burden--now approximately $1 billion--is cause for concern, as is the level of corruption. Similarly, while the new coalition government has verbally expressed its commitment to continue the reform process and to maintain macroeconomic discipline, it is not yet clear that it will be able to do so in the face of significant political pressure on both parties to carry out unaffordable campaign promises.
U.S. interests in Mongolia stem from its important role in contributing to stability in a potentially volatile part of the world; the positive example it sets in promoting economic reform and democracy; and its visible support for the United States in the continued war on terrorism. Most notably, Mongolian peacekeeping contingents and advisors are currently on duty in both Iraq and Afghanistan. Mongolia's strategic location between Russia and China, two traditional rivals that are also nuclear powers and important players on the global stage, adds to its significance.
The USAID Program: The projects being carried out under USAID's strategy are tightly focused, directly addressing two of Mongolia's most pressing concerns: sustainable private sector-led economic growth and more effective and accountable governance. Every USAID project in Mongolia helps advance at least one of these two objectives.
(Excerpted from the 2006 Congressional Budget Justification for Mongolia)
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