Mongolia and the EU: solving problems together

Project description

Title: Economic Governance for Equitable Growth (EG4EG)
Commissioned by: European Union
Financier: European Union
Country: Mongolia
Lead executing agency: Ministry of Finance, Ministry of Population Development and Social Protection, Ministry of Industry
Overall term: 2015 to 2018

Context

Mongolia has enjoyed a significant economic upturn over the past 14 years. Gross domestic product (GDP) increased by an average of 5.6 per cent a year between 2000 and 2005, by 6.7 per cent between 2005 and 2010 and by another 10.7 per cent up to 2013. With its current gross national income of more than USD 4,126, Mongolia has evolved from a low-wage nation to a medium-income country at the upper end of the scale. The under-five mortality rate has dropped fourfold; modern information and communications technology is now commonplace – the country has transformed into an information society. Poverty reduction is not keeping pace with these positive developments, however. Mongolia's poverty rate was 36.3 per cent in 1995 and dropped to 21.6 per cent by 2014. These figures show that the country's growth is not benefiting all parts of society to the same extent.

Mongolia's abundant mineral resources offer great potential. On the road towards becoming a prosperous country with a relatively high level of social development, a dynamic market and a diversified economy, it still needs to face several challenges, however. Strong institutions and qualified experts and managers are needed to develop viable economic and development policy strategies and to put them into practice.

Objective

Line ministries and Mongolia's system of governance provide better public services, the administration works more efficiently and the country uses the revenue from the mineral sector to achieve equitable growth.

Approach

Mongolia has already introduced an integrated policy planning system. The adoption of the law on development policy and planning in November 2015 created a legal framework for binding and coordinated policy planning that specifies the rights and obligations of the responsible authorities. In order to fully implement the law, key principles and processes need to be developed; the staff also require the necessary skills and expertise to put planning specifications into practice. The project team is thus assisting the Mongolian Government in developing a legal framework that encompasses the entire political cycle and is strongly linked to the budget, the fiscal framework and the development of qualified experts.

Realistic national development strategies can only be planned and put into practice if the public financial administration functions effectively. According to the World Bank's public financial management performance report of April 2015, the economy's high mineral resource dependency is one of the main reasons for the low credibility of the Mongolian Government's budget and the medium-term fiscal framework. The project team is thus supporting Mongolia's Ministry of Finance in developing the technical equipment and expertise with a view to mineral revenue forecasts, macro-economic modelling, international taxation and fund management.

On the allocation side of public financial management, the project is cooperating with the Ministry of Population Development and Social Protection (MoPDSP). The declared aim of state policy on pension reform as at June 2015 was to limit the ongoing growth of pension costs, but at the same time guarantee pensions for older people that allow them to live a decent life. In addition, current social services need to be standardised in order to provide and harness resources more effectively.

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