ULAANBAATAR, December 13, 2022—Mongolia has an opportunity to strengthen its business environment to create a more level-playing field for companies, particularly small and medium enterprises, (SMEs) and facilitate a more productive private sector beyond the mining sector, according to a World Bank report released today.
For two decades, economic growth performance has been impressive – though volatile – in Mongolia, with significant success in poverty reduction and human well-being. However, the country has become highly dependent on commodities exports, especially coal and copper with weak linkages between mining and the rest of the economy. Unemployment is high, and the labor force participation is falling, notably for women.
Establishing a more conducive and predictable business environment would benefit SMEs, which are more vulnerable to restrictive regulations and make up 97 percent of the active firms in the country, according to the Mongolia Business Environment and Competitiveness Assessment report. They contribute around 5.5 percent of GDP and 2.4 percent to exports (31 percent to non-mining exports). Mongolian SMEs could be positioned as active agents of the country’s much needed economic diversification and transformation, integrated in clusters and supply chains for goods and services, providing jobs and fostering inclusive growth, according to the report.
“The Government of Mongolia has recognized the need for a more conducive investment climate and implemented several significant reforms.” Andrei Mikhnev, World Bank Country Manager for Mongolia. "It is crucial for policymakers to stay the course when tackling business environment reforms – ensuring policy coherence and minimizing implementation gaps while modernizing policies and legal frameworks in the medium to longer-term."
The report recommends focusing on increasing competition amongst firms to encourage investment and foster innovation. It also highlights the importance of reducing barriers to international trade to facilitate competitiveness of domestic manufacturing and boost non-mining productive sectors. Other recommendations include digitizing and simplifying administrative systems to improve government services that create a conducive business environment.
