Mongolia - ECONOMY

---

Mongolia - The Economy

ON THE EVE OF the 1921 revolution, Mongolia had an underdeveloped, stagnant economy based on nomadic animal husbandry. Farming and industry were almost nonexistent; transportation and communications were primitive; banking, services, and trade were almost exclusively in the hands of foreigners. Most of the people were either illiterate nomadic herders or monks. Property in the form of livestock was owned primarily by aristocrats and monasteries; ownership of the remaining sectors of the economy was dominated by foreigners. Mongolia's new rulers thus were faced with a daunting task in building a modern, socialist economy.

Mongolia's economic development under communist control can be divided into three periods: 1921-1939; 1940-1960; and 1961 to the present. During the first period, which the Mongolian government called the stage of "general democratic transformation," the economy remained primarily agrarian and underdeveloped. After an abortive attempt to collectivize herders, or arads, livestock raising remained in private hands. The state began to develop industry based on processing of animal husbandry products and crop raising on state farms. Transportation, communications, domestic and foreign trade, and banking and finance were nationalized with Soviet assistance; they were placed under the control of Mongolian state and cooperative organizations or Mongolian-Soviet joint-stock companies. Ulaanbaatar became the nation's industrial center.

During the second period, called the "construction of the foundations of socialism," agriculture was collectivized, and industry was diversified into mining, timber processing, and consumer goods production. Central planning of the economy began in 1931 with an abortive five-year pland and with annual plans in 1941; five-year plans began a new with the First Five-Year Plan (1948-52). Soviet aid increased, financing the construction of the trans-Mongolia railroad--the Ulaanbaatar Railroad--and various industrial projects. China also provided assistance, primarily in the form of labor for infrastructure projects. Although industrial development still was concentrated in Ulaanbaatar, economic decentralization began with the completion of the Ulaanbaatar Railroad and the establishment of food processing plants in aymag centers.

The third stage, which the government called the "completion of the construction of the material and technical basis of socialism," saw further industrialization and agricultural growth, aided largely by Mongolia's joining the Council for Mutual Economic Assistance (Comecon) in 1962. Soviet and East European financial and technical assistance in the forms of credits, advisers, and joint ventures enabled Mongolia to modernize and to diversify industry, particularly in mining. New industrial centers were built in Baga Nuur, Choybalsan, Darhan, and Erdenet, and industrial output rose significantly. Although animal husbandry was stagnant, crop production increased dramatically with the development of virgin lands by state farms. Foreign trade with Comecon nations grew substantially. Transportation and communications systems were improved, linking population and industrial centers and extending to more remote rural areas. In the late 1980s, Mongolia had developed into an agricultural-industrial economy, but the inefficiencies of a centrally planned and managed economy and the example of perestroika in the Soviet Union led Mongolian leaders to undertake a reform program to develop the economy further.

<>Socialist Framework of the Economy
<>Natural Resources
<>Agriculture
<>Industry
<>Banking and Insurance
<>Labor Force
<>Foreign Economic Relations and Comecon
<>Tourism

Mongolia

Mongolia - Socialist Framework of the Economy

Role of the Government

In the late 1980s, Mongolia had a planned economy based on socialist ownership of the means of production. According to the Mongolian Constitution, socialist ownership has two forms: state ownership (of land and natural resources, economic facilities and infrastructure; and the property of all state organizations, enterprises, and institutions) and cooperative ownership (property of agricultural associations and other types of cooperatives). Private ownership was negligible in all sectors of the economy, except animal husbandry, but economic reforms adopted since 1986 gave greater leeway for individual and cooperative enterprises. The economy was directed by a single state national economic plan, which, when confirmed by the legislature, the People's Great Hural, had the force of law. In accordance with the plan, the state annually drew up a state budget, which was confirmed and published in the form of a law. The Council of Ministers constitutionally was charged with planning the national economy; implementing the national economic plan and the state and local budgets; directing financial and credit policy; exercising a foreign trade monopoly; establishing and directing the activities of ministries and other state institutions concerned with economic construction; defending socialist production; and strengthening socialist ownership.

In December 1987 and January 1988, the top-level state economic organizations under the Council of Ministers were reorganized. The State Planning and Economic Committee was formed out of the former State Planning Commission, the State Labor and Social Welfare Committee, the State Prices and Standards Committee, and the Central Statistical Board. New economic entities were the Ministry of Agriculture and Food Industry; the Ministry of Environmental Protection; the Ministry of Foreign Economic Relations and Supply; the Ministry of Light Industry; and the Ministry of Power, Mining Industry, and Geology. Unaffected by the reorganization were the Ministry of Social Economy and Services, the Ministry of Communications, the Ministry of Finance, the Ministry of Transport, the State Construction Committee, and the State Bank of the Mongolian People's Republic. Local government organizations--the executive committees of hurals--implemented economic plans and budgets, directed economic construction, and supervised the work of economic and cooperative organizations at their level.

Planning

Planning in communist-run Mongolia had an inauspicious start with the Five-Year Plan for 1931-35, which set unrealistically high targets for production and called for the collectivization of agricultural production. This plan was abandoned in 1932 in the face of widespread resistance to collectivization and the failure to meet production goals. Annual planning was introduced in 1941 in an effort to deal with wartime shortages. Five-year plans were reintroduced in 1948 with the First Plan. The Second Five-Year Plan (1953-57) was followed by the Three-Year Plan (1958-60). Regular five-year plans were resumed with the Third Five-Year Plan (1961-65), and they have continued to be used since then.

In the late 1980s, economic planning in Mongolia included long-term, five-year, and annual plans that operated on multiple levels. Planning originated with the Mongolian People's Revolutionary Party, which produced the guidelines for economic and social development for the five-year period corresponding to the party's congress. Based on these guidelines, the Standing Commission on Economic-Budget Affairs of the People's Great Hural drafted the five-year national and annual economic plans, which were approved by the People's Great Hural and became law. The Council of Ministers directed and implemented national planning through the State Planning and Economic Committee and through the Ministry of Finance. Planning for different sectors of the economy was conducted by relevant ministries and state committees; local plans were drawn up by local governmental organizations.

Mongolia's five-year plans have been coordinated with those of the Soviet Union since 1961 and with Comecon multilateral five-year plans since 1976. Annual plan coordination with the Soviet Union, which is made official in signed protocols, began in 1971. Mongolian planners were trained by Soviet planners and cooperated with them in drafting long-term plans, such as the General Scheme for the Development and Location of the Mongolian People's Republic Productive Forces up to 1990, produced in the late 1970s; and the Longterm Program for the Development of Economic, Scientific, and Technical Cooperation Between the Mongolian People' Republic and the USSR for the Period up to 2000, signed in 1985.

National economic plans included general development goals as well as specific targets and quotas for agriculture, capital construction and investment, domestic and foreign trade, industry, labor resources and wages, retail sales and services, telecommunications, and transportation. The plans also focused on such social development goals and targets as improved living standards, population increase, cultural development, and scientific and technical development.

Budget

The Ministry of Finance prepared annual national budgets and provided guidance to the formulation of local budgets. The national budget included the budget of the central government, the budgets of aymag and city governments, and the budget of the national social insurance fund. The national budget grew with the expansion of the economy: In 1940 revenues were 123.9 million tugriks and expenditures, 122.1 million tugriks; in 1985 revenues were 5,743 million tugriks and expenditures, 5,692.5 million tugriks. The structure of the national budget changed between 1940 and 1985. In 1940 some 34.6 percent of revenues came from the turnover tax (a value added tax on each transaction), 7.8 percent from deductions from profits, 16.7 percent from taxes on the population, and 40.9 percent from other kinds of income. In 1985 nearly 63 percent of revenues came from the turnover tax, 29.9 percent from deductions from profits, 3.5 percent from deductions from the social insurance fund, 0.7 percent from taxes on the population, and 3.2 percent from other types of income. In 1940 some 21.9 percent of expenditures went to develop the national economy; 19.7 percent to social and cultural programs; and 58.4 percent to defense, state administration, reserves, and other expenses. In 1985 about 42.6 percent of expenditures went to developing the national economy; 38.7 percent to social and cultural programs; and 18.7 percent to defense, state administration, reserves, and other expenses. The proposed 1989 budget had revenues and expenditures of 6.97 billion tugriks. Proposed expenditures for 1989 included 1.8 billion tugriks for developing agriculture, 2.1 billion for industry, and 1.6 billion for capital investment. Of the 2.76 billion tugriks proposed for social and cultural development, 1.16 billion was to go for education; 597.5 million for health, physical culture, and sports; 259.7 million for science, culture, and art; and 747.4 million for the social insurance fund. Subsidies to maintain stable retail prices totaled 213 million tugriks. Local budgets, through which 70 percent of social and cultural expenditures were funneled, totaled 3.46 billion tugriks.

Structure of the Economy

Socialist development transformed Mongolia from a predominantly agrarian, nomadic economy in 1921 into a developing, agricultural-industrial economy in the late 1980s. In 1985 a reported 18.3 percent of produced national income was derived from agriculture, 32.4 percent from industry, 4.9 percent from construction, 11.2 percent from transportation and communications, 31.6 percent from domestic trade and services, and 1.6 percent from other sectors. Sixty percent of disposable national income went to consumption, and 40 percent went to accumulation. Fixed assets totaled about 38.9 billion tugriks, of which 66.5 percent were productive fixed assets, including livestock, and 33.5 percent were nonproductive. Industry and construction accounted for 38.1 percent of the productive fixed assets; agriculture, 16 percent; transportation and communications, 9 percent; and domestic trade and services, 3.4 percent. Investment totaled 4.624 billion tugriks, 97.9 percent of which went to the state sector, and 2.1 percent, to the cooperative sector. During the Seventh Five-Year Plan (1981-85), 68.9 percent of investments went into the productive sectors of the economy, and 31.1 percent, into nonproductive sectors. Industry and construction received 44.7 percent of investment during this period; agriculture, 13.9 percent; transportation and communications, 9.0 percent; and domestic trade and services, 1.3 percent. The Eighth Five-Year Plan (1986-90) called for increasing produced national income by 26 to 29 percent and for raising investment by 24 to 26 percent, of which 70 percent was to go to developing material production.

In the late 1980s, Mongolia was divided into three economic regions. The western region (Bayan-Olgiy, Hovd, Uvs, Dzavhan, and Govi-Altay aymags), with 21 percent of the nation's population, was predominantly agricultural. The western region had 32 percent of Mongolia's livestock and produced about 30 percent of its wool and meat. Local industry was engaged in processing of animal husbandry products, timber, minerals, and building materials. Transportation was predominantly by motor vehicles.

The central economic region (Arhangay, Bayanhongor, Bulgan, Darhan, Dornogovi, Dundgovi, Hovsgol, Omnogovi, Ovorhangay, Selenge, Tov, and Ulaanbaatar aymags) was the dominant producer. The region had 70 percent of Mongolia's population (including the cities of Baga Nuur, Darhan, Erdenet, and Ulaanbaatar); 55 percent of its territory; 75 percent of its arable land; 90 percent of surveyed coal deposits; and 100 percent of copper, molybdenum, iron ore, and phosphate deposits. This region accounted for 80 percent of gross industrial production, 90 percent of light industrial production, and 80 percent of food industry production, 75 percent of coal production, and 100 percent of copper-molybdenum, iron ore, and phosphate mining. It also accounted for 60 percent of gross agricultural production, 60 percent of milk production, 50 percent of meat production, and 80 percent of grain, potato, and vegetable production.

The eastern economic region (Dornod, Hentiy, and Suhbaatar aymags) had 9 percent of Mongolia's population, 20 percent of the arable land, and 15 percent of the livestock. The region contributed 15 percent of gross meat production and 13 percent of wool production. Grain production on large state farms hewed out of virgin lands contributed 90 percent of the region's agricultural output. The major industrial center was Choybalsan, which produced 50 percent of regional gross industrial output.

Economic Reforms

In the late 1980s, dissatisfaction with the economic stagnation of the last years of the former regime of Yumjaagiyn Tsedenbal and the influence of the Soviet perestroika led Mongolia to launch its own program of economic reforms. This program had five goals: acceleration of development; application of science and technology to production; reform of management and planning; greater independence of enterprises; and a balance of individual, collective, and societal interests. Acceleration of development in general was to result from the attainment of the other four goals. Scientific research was being redirected to better serve economic development, with electronics, automation, biotechnology, and the creation of materials becoming the priority areas of research and cooperation with Comecon countries.

Reform of management and planning began in 1986 with the first of several rounds of reorganization of governmental bodies dealing with the economy. These changes rationalized and streamlined state economic organizations; reduced the number of administrative positions by 3,000; and saved 20 million tugriks between 1986 and 1988. The role of the central planning bodies was to be reduced by limiting the duties of the State Planning and Economic Committee to overseeing general capital-investment policy. The indicators specified in the five-year and the annual national economic plans also were to be decreased. State committees and ministries, rather than the State Planning and Economic Committee, were to decide upon machinery and equipment purchases. Decentralization of economic management also was to extend to aymag and city administrations and enterprises. These bodies were given greater autonomy in construction and production, and they also were held financially responsible for profits and losses.

Efforts to devolve economic decision making to the enterprise level began in 1986, when more than 100 enterprises began experimenting with financial autonomy (before then, enterprises operating with a deficit had been subsidized by the state). Enterprises were accountable for their own losses, and they were responsible for fulfilling sales contracts and export orders. The draft law on state enterprises, presented to the People's Great Hural in December 1988, was to extend greater independence in economic matters to all state enterprises and to lead to an economy that combined planning and market mechanisms.

Under provisions of the draft law, state enterprises were to be authorized to make their own annual and five-year plans and to negotiate with state and local authorities to pay taxes based on long-term quotas. State enterprises also were to sell output exceeding state orders and unused assets; to establish their own, or to cooperate with existing, scientific organizations to solve scientific and technical problems; to be financially responsible for losses, and to pay back bank loans; to set prices independently; to establish wage rates based on enterprise profitability; to purchase materials and goods from individuals, collectives, state distribution organizations, and wholesale trade enterprises; to establish direct ties with foreign economic organizations; to manage their own foreign currency; and to conduct foreign trade.

The draft law stipulated that enterprises were to be divided into two categories. National enterprises were to be the responsibility of ministries, state committees, and departments; local enterprises were to be supervised by executive committees of aymag and city administrations or members of local hurals. State and local bodies were not to interfere in the day-to-day decision making of enterprises, but they were responsible for ensuring that enterprises obeyed the law and that they did not suppress the interests of society. Enterprises were allowed to form three kinds of associations: production associations, scientific production associations, and enterprise associations to coordinate economic affairs. Finally, the draft law said that the state was the owner of state enterprises and that the labor collective was the lawful manager of a state enterprise. The labor collective was to elect a labor collective council, which was to ensure that the enterprise director (who acted on behalf of the collective and the state) met the interests of the collective in managing the enterprise. It was unclear how the relationship between the enterprise director and the labor collective would work out in practice.

Balancing the interests of society, the collective, and the individual entailed providing scope for individual and collective initiative to increase production and efficiency. Enlarging the scope for individual initiative had three aspects: linking wages to enterprise profitability, permitting output exceeding state plans to be sold for profit, and providing employment opportunities outside the state and the cooperative sectors. In 1988 wage scales dependent on enterprise revenues were introduced to the light and food industries and to the domestic trade sector, resulting in a reduction in materials utilized by those sectors. Beginning in late 1986, state farms and negdels (agricultural stations) were eligible for state payments for output exceeding the annual average growth rate for the previous five-year plan. Individual agricultural cooperative members and workers were allowed increasing numbers of privately held livestock. The draft law also stipulated that enterprises could sell production exceeding plan targets for their own profit. In 1987 the government began encouraging the formation of voluntary labor associations, auxiliary farms, and sideline production attached to enterprises, schools, and so forth to increase production of foodstuffs and consumer goods, to engage in primary processing of agricultural goods, and to provide services. The authorities permitted the formation of individual and family-based cooperatives; by 1988 there were 480 such cooperatives. Contracting among state farms and both agricultural cooperatives and families was permitted and was increasing in the late 1980s.

Mongolia

Mongolia - Natural Resources

Mongolia's natural resources include forests, fish, and a variety of minerals. In the late 1980s, Mongolia had 15 million hectares of forests covering 9.6 percent of the nation. Major forested areas were approximately 73 percent Siberian larch, 11 percent cedar, and 6.5 percent pine. Timber stocks were estimated to be 1.3 billion cubic meters. Mongolia's northern rivers and lakes contained more than 50 native species of fish; however, this resource barely was exploited because fish is not popular among Mongolians.

The country's richest resources are minerals--coal, copper, fluorite, gold, iron ore, lead, molybdenum, oil, phosphates, tin, uranium, and wolfram. Coal deposits in the mid-1980s were located at Aduun Chuluu (reserves of 37 million tons), Baga Nuur (reserves of 1 billion tons), Nalayh (reserves of 73 million tons), Sharin Gol (reserves of 69 billion tons), and Tavan Tolgoy (reserves of 9.5 billion tons). Copper and molybdenum were found at Erdenetiyn-ovoo and at Tsagaan Subarga in Dornogovi Aymag. Fluorite deposits were located at Burentsogt in Suhbaatar Aymag, at Berh and Bor Ondor in Hentiy Aymag, and at Har-Ayrag in Dornogovi Aymag. Northern Mongolia, particularly Tov and Selenge aymags, had widespread gold deposits. These sites included Tavan Tolgoy, Erhet, and Bugant; the Yoroo Gol and the Bayan Gol; and Narantolgoy. Other gold deposits were found at Noyon Uul in Hentiy Aymag and at Altan Uul in Omnogovi Aymag. Iron ore occurred at Bayan Gol, at Bayan Uul in Hovsgol Aymag, at Bayasgalant in Dundgovi Aymag, and at Yoroo in Selenge Aymag. Lead deposits were found at Jargalthaan in Hentiy Aymag and at Bordzongiyn Govi in Omnogovi Aymag. A major limestone deposit was discovered at Hotol in Bulgan Aymag. Mongolia exploited oil deposits at Dzuunbayan and Tsagaan Els in Dornogovi Aymag, and at Tamsagbulag in Dornod Aymag in the 1950s and the 1960s. Reports on the exploitation of oil deposits ceased after 1968. Phosphates were found at Urandosh in Hovsgol Aymag. Prospecting teams have discovered extensive veins of potash mica running through 350 kilometers of the Altai Mountains. Tin was located at Nomgon in Omnogovi Aymag and at Yeguudzer in Suhbaatar Aymag. Wolfram deposits were exploited at Burentsogt, Chonogol, Ihhayrhan, Salaa, and Hanhohiy in Tov and Suhbaatar aymags. Uranium has been discovered in Mongolia, but there were no reports of deposits that were being tapped in the 1980s.

Mongolia has cooperated extensively with Comecon countries in surveying the country's natural resources. Joint geological prospecting teams have located more than 500 mineral deposits in Mongolia. The Erdenetiyn-ovoo copper-molybdenum deposit, for example, was discovered with Soviet and Czechoslovak assistance. The Soviet Union has been the most active of the Comecon nations in joint exploration of Mongolia's mineral resources. The Joint Mongolian-Soviet Geological Expedition has discovered previously unknown minerals, has published monographs and metallogenic maps; and has focused its surveying efforts on searching for nonferrous, rare, and precious metals, fluorite, phosphates, building materials, and coal. Geological prospecting is thus conducted to assist Mongolian economic development by extending mining industries and by exploiting new mineral deposits.

Mongolia

Mongolia - Agriculture

In the late 1980s, agriculture was a small but critical sector of the Mongolian economy. In 1985 agriculture accounted for only 18.3 percent of national income and 33.8 percent of the labor force. Nevertheless, agriculture remained economically important because much of Mongolia's industry processed agricultural products--foodstuffs, timber, and animal products, such as skins and hides--for domestic consumption and for export. In 1986 agriculture supplied nearly 60 percent of Mongolia's exports.

Mongolian agriculture developed slowly. An abortive attempt to collectivize all arads occurred in the early 1930s; efforts to encourage voluntary cooperatives and arad producers' associations followed. In the 1930s, the government also began developing state farms, and by 1940 there were ten state farms and ninety-one agricultural cooperatives. In 1937 the Soviet Union provided ten hay-making machine stations to prepare fodder for livestock. In 1940 agriculture represented 61 percent of national income, and it employed approximately 90 percent of the labor force.

In the 1950s, agriculture began to adopt its present structure and modern techniques, based in part on material and technical assistance from the Soviet Union and East European countries. In the 1950s, the hay-making machine stations were reorganized as livestock machine stations. In 1955 negdels replaced the arad producers' associations. By 1959 the state had accomplished the collectivization of agriculture. In ten years, agricultural cooperatives had more than doubled, from 139 in 1950 to 354 by 1960. Ownership of livestock and sown areas changed dramatically as a result of collectivization. In 1950, according to Mongolian government statistics, state farms and other state organizations owned approximately 0.9 percent of livestock and 37.8 percent of sown areas; negdels had about 0.5 percent of livestock and no sown lands; and private owners some held 98.3 percent of livestock and 62.2 percent of sown areas. In 1960 state farms and other state organizations owned 2.7 percent of livestock; negdels, 73.8 percent; and individual negdel members, 23.5 percent. The state sector owned 77.5 percent of sown lands, and the cooperative sector the remainder.

By 1960 agriculture's share of national income had fallen to 22.9 percent, but agriculture still employed 60.8 percent of the work force. After 1960 the number of state farms increased, state fodder supply farms were established, the number of negdels decreased through consolidation, and interagricultural cooperative associations were organized to facilitate negdel specialization and cooperation. Mongolia also began receiving large-scale agricultural assistance from the Soviet Union and other East European countries after Mongolia's 1962 entry into Comecon. The Soviet Union, for example, assisted in establishing and equipping several new state farms, and Hungary helped with irrigation. In 1967 the Third Congress of Agricultural Association Members founded the Union of Agricultural Associations to supervise negdels and to represent their interests to the government and to other cooperative and social organizations. The union elected a central council, the chairman of which was, ex officio, the minister of agriculture; it also adopted a Model Charter to govern members' rights and obligations. In 1969 the state handed over the livestock machine stations to the negdels.

Negdels, which concentrated on livestock production, were organized into brigad (brigades) and then into suuri (bases), composed of several households. Each suuri had its own equipment and production tasks. Negdels adopted the Soviet system of herding, in which arad households lived in permanent settlements rather than traveling with their herds, as in the pastoral tradition. In 1985 the average negdel had 61,500 head of livestock, 438,500 hectares of land--of which 1,200 hectares was plowable land, 43 tractors, 2 grain harvesters, and 18 motor vehicles; it harvested 500 tons of grain. Individual negdel members were permitted to own livestock. In mountain steppe pasture areas, ten head of livestock per person, up to fifty head per household, were allowed. In desert regions, fifteen head per person, up to seventy-five head per household, were permitted. Private plots also were allowed for negdel farmers.

State farms, compared with negdels, had more capital invested, were more highly mechanized, and generally were located in the most productive regions, or close to major mining and industrial complexes. State farms engaged primarily in crop production. In 1985 there were 52 state farms, 17 fodder supply farms, and 255 negdels. In 1985 the average state farm employed 500 workers; owned 26,200 head of livestock, 178,600 hectares of land--of which 15,400 hectares was plowable land, 265 tractors, 36 grain harvesters, and 40 motor vehicles; it harvested 12,100 tons of grain.

In the late 1980s, several changes in governmental organization occurred to facilitate agricultural development. In October 1986, the Ministry of Agriculture absorbed the Ministry of Water Economy, which had controlled irrigation. In December 1987, the Ministry of Agriculture, the Ministry of Forestry and Woodworking, and the Ministry of Food and Light Industries were abolished and two new ministries--the Ministry of Agriculture and Food Industry, and the Ministry of Environmental Protection--were established. Among the functions of the Ministry of Agriculture and Food Industry were the further coordination of agriculture and of industrial food processing to boost the food supply, and the development on state farms of agro-industrial complexes, which had processing plants for foodstuffs. The Sharin Gol state farm, for example, grew fruits and vegetables, which then were processed in the state farm's factories to produce dried fruit, fruit juices, fruit and vegetable preserves, and pickled vegetables. The Ministry of Environmental Protection incorporated the Forestry and Hunting Economy Section of the former Ministry of Forestry and Woodworking and the State Land and Water Utilization and Protection Service of the former Ministry of Agriculture.

Crop Production

Since its inception, the Mongolian People's Republic has devoted considerable resources to developing crop production in what was a predominantly nomadic, pastoral economy. Mongols traditionally disdained the raising of crops, which was conducted for the most part by Chinese farmers. Early efforts to force arads to become farmers failed, and the government turned to the creation of state farms to promote crop production. By 1941 when the state had established ten state farms, Mongolia had 26,600 hectares of sown land. State farms, however, accounted for only 29.6 percent of the planted areas.

After World War II, Mongolia intensified efforts to expand crop production by establishing more state farms, by reclaiming virgin lands for crop raising, by mechanizing farm operations, and by developing irrigation systems for farmlands. When Mongolia began to report statistics on arable land in 1960, there were 532,000 hectares of arable land, and sown crops covered 265,000 hectares of the 477,000 hectares of plow land. Mongolia's 25 state farms accounted for 77.5 percent of sown areas, and cooperatives, for 22.5 percent. In 1985 when 52 state farms and 17 fodder supply farms existed, there were about 1.2 million hectares of arable land, and sown crops covered 789,600 hectares of the approximately 1 million hectares of plow land. The state sector accounted for 80.6 percent of sown areas, and cooperatives, for 19.4 percent. Development of virgin lands by state farms was responsible for most of the expansion of arable land and sown areas. Land reclamation started in the late 1950s and the early 1960s, when 530,000 hectares were developed, and it continued throughout each five-year plan. During the Seventh Plan, 250,000 hectares were assimilated, and the Eighth Plan called for an additional 120,000 to 130,000 hectares to be reclaimed.

Mechanization of farm operations commenced on a large scale in the 1950s with Soviet assistance. The Soviet Union provided most agricultural machines, as well as advice and expertise in mechanization. State farms were more highly mechanized than cooperatives. For example, in 1985, 100 percent of potato planting and 84 percent of potato harvesting were mechanized on state farms, compared with 85 percent and 35 percent, respectively, in negdels. Beginning in the 1960s, state farms also pioneered the development of irrigation systems for crops. By 1985 Mongolia had 85,200 hectares of available irrigated land, of which 81,600 hectares actually were irrigated.

Crop production initially concentrated on raising cereals; in 1941 cereals covered 95.1 percent of sown areas, while 3.4 percent was devoted to potatoes and 1.5 percent to vegetables. Cultivation of fodder crops began in the 1950s. In 1985 cereals covered 80.6 percent of sown areas, fodder crops 17.7 percent, potatoes 1.3 percent, and vegetables 0.4 percent. Mongolia's staple crops were wheat, barley, oats, potatoes, vegetables, hay, and silage crops. Since 1960 agricultural performance--as measured by gross output, per capita output, and crop yields--was uneven. Although sown acreage expanded dramatically between 1960 and 1980, output and crop yields remained stagnant and, in some cases, fell because of natural disasters and poor management. In addition to the staple crops mentioned, Mongolia also produced small quantities of oil-yielding crops, such as sunflower and rape, and fruits and vegetables, such as sea buckthorn, apples, European black currants, watermelons, muskmelons, onions, and garlic. Small amounts of alfalfa, soybean, millet, and peas also were grown to provide protein fodder.

The Eighth Plan called for increasing the average annual gross harvest of cereals to between 780,000 and 800,000 tons; potatoes to between 150,000 and 160,000 tons; vegetables to between 50,000 and 80,000 tons; silage crops to between 280,000 and 300,000 tons; and annual and perennial fodder crops to between 330,000 and 360,000 tons. Emphasis was placed on raising crop production and quality by increasing mechanization; improving and expanding acreage; raising crop yields; expanding irrigation; selecting cereal varieties better adapted to natural climatic conditions and better locations for cereal cultivation; applying greater volumes of organic and mineral fertilizers; building more storage facilities; reducing losses because of pests, weeds, and plant diseases; and preventing soil erosion. Emphasis also was put on improving management of crop production on state farms and negdels as well as of procurement, transport, processing, and storage of agricultural products.

Animal Husbandry

From prerevolutionary times until well into the 1970s, animal husbandry was the mainstay of the Mongolian economy. In the traditional economy, livestock provided foodstuffs and clothing; after the 1921 revolution, livestock supplied foodstuffs and raw materials for industries and for export. Mongolia had 9.6 million head of livestock in 1918 and 13.8 million head in 1924; arad ownership was estimated to be 50 to 80 percent of all livestock, and monastic and aristocratic ownership to be 50 to 20 percent. Policies designed to force collectivization in the early 1930s met with arad resistance, including the slaughter of their own animals. Reversal of these policies led to a growth in livestock numbers, which peaked in 1941 at 27.5 million head. World War II brought new commitments to provide food and raw materials for the Soviet war effort. With the levy of taxes in kind, livestock numbers fell to about 20 million in 1945, and they have hovered between 20 million and 24 million head since then. Collectivization and advances in veterinary science have failed to boost livestock production significantly since the late 1940s. In 1940 animal husbandry produced 99.6 percent of gross agricultural output. The share of animal husbandry in gross agricultural output declined after World War II, to 71.8 percent in 1960, 81.6 percent in 1970, 79.5 percent in 1980, and 70 percent in 1985. The rise in crop production since 1940 has accounted for animal husbandry's decline in gross agricultural output.

Nevertheless, in the late 1980s, animal husbandry continued to be an important component of the national economy, supplying foodstuffs and raw materials for domestic consumption, for processing by industry, and for export. In 1985 there were 22,485,500 head of livestock, of which 58.9 percent were sheep; 19.1 percent, goats; 10.7 percent, cattle; 8.8 percent, horses; and 2.5 percent, camels. In addition, pigs, poultry, and bees were raised. In 1985 there were 56,100 pigs and 271,300 head of poultry; no figures were available on apiculture. Livestock products included meat and fat from camels, cattle, chickens, horses, goats, pigs and sheep; eggs; honey; milk; wool from camels, cattle, goats, and sheep; and hides and skins from camels, cattle, goats, horses, and sheep. In 1986 exports of livestock products included 15,500 tons of wool, 121,000 large hides, 1,256,000 small hides, and 44,100 tons of meat and meat products.

In the late 1980s, differences existed in ownership and productivity of livestock among state farms, agricultural cooperatives, and individual cooperative members. For example, in 1985 agricultural cooperatives owned 70.1 percent of the "five animals"--camels, cattle, goats, horses, and sheep; state farms, 6 percent, other state organizations, 1.7 percent; and individual cooperative members, 22.2 percent. State farms raised 81.4 percent of all poultry; other state organizations, 3.3 percent; cooperatives, 12.9 percent; and individual cooperative members, 2.4 percent. State farms accounted for 19.1 percent of pig raising; other state organizations, for 34.2 percent; agricultural cooperatives, for 12.5 percent; and individual cooperative members, for 34.2 percent. Survival rates of young livestock were higher in the cooperatives than on state farms; however, state farms produced higher yields of milk and wool. Fodder for livestock in the agricultural cooperatives was supplemented by production on state fodder supply farms and on state farms, which had higher output and yields.

Despite its economic importance, in the late 1980s animal husbandry faced many problems: labor shortages, stagnant production and yields, inclement weather, poor management, diseases, and the necessity to use breeding stock to meet high export quotas. The Eighth Plan attempted to address some of these problems. To alleviate labor shortages, the plan called for higher income, increased mechanization, and improved working and cultural conditions in rural areas to retain animal husbandry workers, particularly those with technical training. Measures to raise productivity included increased mechanization; improved breeding techniques to boost meat, milk, and wool yields and to cut losses from barrenness and miscarriages; and strengthened veterinary services to reduce illness. Additional livestock facilities were to be built to provide shelter from harsh winter weather and to fatten livestock. More efficient use of fodder was sought through expanding production; improving varieties; and decreasing losses in procurement, shipping, processing, and storage. Pastureland was to be improved by expanding irrigation and by combating pests.

Overcoming poor management was more difficult. Local party, state, and cooperative organizations were admonished to manage animal husbandry more efficiently, and cooperative members were requested to care for collectively owned livestock as if it were their own. In addition, more concrete measures to improve the management and the productivity of animal husbandry were adopted in the late 1980s. The individual livestock holdings of workers, employees, and citizens were increased to eight head per household in major towns, sixteen head in smaller towns, and twenty-five head in rural areas; households were allowed to dispose of surplus produce through the cooperative trade network and through the state procurement system. Auxiliary farms run by factories, offices, and schools were established to raise additional pigs, poultry, and rabbits, as well as to grow some vegetables. Family contracts concluded on a voluntary basis with cooperatives or with state farms were reported by the government to increase high-quality output, to lower production expenses, and to enhance production efficiency.

Forestry

Mongolia's vast forests (15 million hectares) are exploited for timber, hunting, and fur-bearing animals. In 1984 a Mongolian source stated that the forestry sector accounted for about onesixth of gross national product (GNP). Until December 1987, exploitation of these resources was supervised by the Forestry and Hunting Economy Section of the Ministry of Forestry and Woodworking. In that month this section was integrated into the new Ministry of Environmental Protection. The woodworking component of the former ministry presumably became part of the new Ministry of Light Industry. The Ministry of Environmental Protection's assumption of control of forest resources reflected the government's concern over environmental degradation resulting from indiscriminate deforestation. Forestry enterprises reafforested only 5,000 hectares of the 20,000 hectares felled annually. In addition, fires engulfed 1 million hectares of forest between 1980 and 1986. Mongolia's shrinking forests lowered water levels in many tributaries of the Selenge and Orhon rivers, hurting soil conservation and creating water shortages in Ulaanbaatar.

Timber enterprises and their downstream industries made a sizable contribution to the Mongolian economy, accounting for 10 percent of gross industrial output in 1985. Approximately 2.5 million cubic meters of timber were cut annually. Fuel wood accounted for about 55 percent of the timber cut, and the remainder was processed by the woodworking industry. In 1986 Mongolia produced 627,000 cubic meters of sawn timber, of which 121,000 cubic meters was exported. Lumber also was exported; lumber exports declined dramatically from 104,000 cubic meters in 1984 to 85,700 cubic meters in 1985 and to 39,000 cubic meters in 1986.

Mongolia's forests and steppes abounded with animals that were hunted for their fur, meat, and other products in the late 1980s. Fur-bearing animals included marmots, muskrats, squirrels, foxes, korsak (steppe foxes), and wolves, which were hunted, and such animals as deer, sable, and ermine, which were raised on state animal farms. Animal pelts were exported in large numbers. In 1985 Mongolia exported more than 1 million small hides, which included some of the 763,400 marmot pelts, 23,800 squirrel skins, 3,700 wolf skins, and other furs. Marmot also was hunted for its fat, which was processed industrially. Mongolian gazelles were hunted for their meat, and red deer, for their antler velvet. Organized hunting of wild sheep was a foreign tourist attraction.

Fishing

Mongolia's lakes and rivers teem with freshwater fish. Mongolia has developed a small-scale fishing industry, to export canned fish. Little information was available on the types and the quantities of fish processed for export, but in 1986, the total fish catch was 400 metric tons in live weight.

Mongolia

Mongolia - Industry

In 1924 Mongolian industry was limited to the Nalayh coal mine, an electric power plant in Ulaanbaatar, and various handicrafts. Gross industrial output (measured in constant 1967 prices), was 300,000 tugriks. Industry developed very slowly in the first two decades of the Mongolian People's Republic, primarily because Mongolia's benefactor, the Soviet Union, provided few resources to invest in industrialization. With Soviet advice, however, Mongolia adopted an industrial strategy that was based on the exploitation of natural resources and agriculture and it has followed this strategy since. The first steps to develop industry began in the 1930s. In 1933 the Union of Artisans was organized. In 1934 the Choybalsan industrial combine, the flagship of Mongolian industry, began operating in Ulaanbaatar. The combine, a joint Mongolian-Soviet company transferred to Mongolian control in 1935, had its own power plant, cloth factories, tanneries, and wool-scouring mill that produced blankets, felt, footwear, leather coats, and soap. Coal production at Nalayh rose in the 1930s, and in 1938 the narrowgauge railroad connecting the mine with the capital's powergenerating station was completed. In 1940 industry accounted for 8.5 percent, and construction for 0.8 percent, of national income. Gross industrial output rose to 124.7 million tugriks.

Industry began to develop substantially after World War II, when Soviet aid increased and Soviet-style central planning was introduced, and, in the 1950s, when Chinese assistance started. Most industrialization occurred in Ulaanbaatar; smaller food combines and livestock-product processing plants were scattered throughout the country. In the 1950s, major projects completed with Soviet assistance included the modernization of the Choybalsan industrial combine; the expansion of production at the Nalayh coal mine; the opening of oil wells in Buyant-Uhaa (Sayn Shand); and the construction of four felt-rolling mills, a water supply plant, and leather-processing factories. Chinese aid was given primarily in the form of construction projects; Chinese laborers built roads, bridges, housing, and a hydroelectric power plant. By 1960 industry and construction accounted for 14.6 percent and 6.7 percent, respectively, of national income. Gross industrial output (in constant 1967 prices) was 676.8 million tugriks.

Industrialization took a big step forward after 1960. Largescale investment by the Soviet Union and other East European countries took place with Mongolia's entry into Comecon in 1962. This assistance enabled Mongolia to diversify industry geographically and sectorally. Major industrial centers were built at Darhan and Choybalsan in the 1960s and at Erdenet and Baga Nuur in the 1970s and the 1980s. After 1970 the scope of industry expanded beyond processing of agricultural products; exploitation of minerals developed on a large scale, and the energy and the construction industries, which supported such development, also grew. In 1970 industry and construction accounted for 22.6 percent and 5.8 percent of national income, respectively; in 1985 they accounted for 32.4 and 4.9 percent of national income, respectively. Gross industrial output (in constant 1967 prices) was 1,733.2 million tugriks in 1970 and 6,244.4 million tugriks in 1985.

In the late 1980s, industry was concentrated in several urban centers. Baga Nuur was a coal-mining and energy production center. Bor Ondor produced fluorite. Choybalsan had a coal mine, a meat-packing plant, a foodstuffs combine, and a wool-scouring mill. Darhan was close to the Sharin Gol coal mine and produced construction materials, foodstuffs, and light industrial products. Erdenet, home of the copper and molybdenum processing combine, also manufactured carpets and processed timber. Hotol was the location of major limestone deposits and a cement production center. Ulaanbaatar, the oldest industrial center, specialized in coal and energy production, food processing, livestock-product processing, and textiles.

Changes in government organizations responsible for industry reflected the regime's efforts to spur industrial development. In 1968 the Ministry of Industry, originally established in 1938, was abolished; the Ministry of Food Industry was transformed into the Ministry of Food and Light Industries. That same year, the Ministry of Geology became the Ministry of Fuel, Power, and Geology. In 1972 the Ministry of Food and Light Industries established industrial producers' associations modeled on Soviet producers' associations. The industrial producers's asociations grouped ministry enterprises according to their specialization in clothing, flour and fodder, footwear, hides and skins, and wool. In 1976 the Ministry of Fuel, Power, and Geology was divided into the Ministry of Fuel and Power Industry and the Ministry of Geology and Mining. In 1986 the Ministry of Construction and Construction Materials Industry and the State Committee for Construction, Architecture, and Technical Control were dissolved, and the State Construction Committee was established. In December 1987, the Ministry of Forestry and Woodworking, the Ministry of Geology and Mining, the Ministry of Fuel and Power Industry, and the Ministry of Food and Light Industries were replaced by the Ministry of Agriculture and Food Industry, the Ministry of Light Industry, and the Ministry of Power, Mining Industry, and Geology. Government organizations also concerned with industry in the late 1980s were the State Construction Committee and the Ministry of Social Economy and Services, formed in 1972 to supervise handicraft production and the artels, or handicraft producers' associations.

The Ministry of Environmental Protection also was formed in 1987 out of the Forestry and Hunting Economy Section of the Ministry of Forestry and Woodworking, the State Land and Water Utilization and Protection Service of the Ministry of Agriculture, and the Main Hydrometeorological Administration of the Council of Ministers; it dealt with industrial pollution. Environmental degradation of the Hovsgol Nuur-Selenge Moron-Lake Baykal ecosystem was a concern of both Mongolian and Soviet authorities. To limit ecological damage, the Ministry of Environmental Protection took steps to close the Hatgal woolscouring mill on Hovsgol Nuur, to end shipping of gas and oil in the summer, and to cease carbon-monoxide-producing motor transportation across the ice during the winter. Plans to open the Urandosh strip mine on the banks of Hovsgol Nuur also were postponed. Other measures to alleviate environmental pollution included closing thermal power stations in Ulaanbaatar and moving industrial facilities outside the city in order to reduce air pollution. Strip mining in Mongolia--particularly at the Baga Nuur, Erdenet, and Sharin Gol mines--had created large slag heaps of concern to environmentalists. Other sources of ecological degradation were the dumping of industrial, agricultural, and household waste into small rivers and lakes.

Light Industry

In the late 1980s, Mongolian light industry included woodworking, textiles, clothing, leather and footwear, printing, and food industries, which, primarily, processed agricultural products, and handicrafts. In 1985 light industry accounted for 74.2 percent of gross industrial output. Woodworking enterprises included woodworking plants and combines, paper plants, prefabricated housing factories, match factories, furniture factories, and handicraft enterprises engaged in the production of ger frames, carts, and barrels. The food industry's meat-packing plants, dairies, distilleries, and flour mills produced canned meat, sausages, lard, soap, milk, butter, beverages, and confectionery products. The textile and clothing industries processed wool and produced woolen cloth, blankets, carpets, knitwear, cashmere sweaters, and school uniforms. The leather and the footwear industries processed hides and skins from sheep, goats, cattle, horses, and camels and produced various leather products, including shoes and coats. The Eighth Plan called for increasing production of various light industries by 17 to 46 percent and for improving labor productivity in these industries by 15 to 33 percent.

Mining

Until the late 1960s, mining in Mongolia consisted primarily of coal extraction. In the 1970s, however, joint exploitation of mineral resources by the Soviet Union and other Comecon nations commenced on a large scale. Comecon and joint Mongolian-Soviet geological teams surveyed the country's natural resources and discovered valuable mineral deposits, such as copper, molybdenum, wolfram, fluorite, gold, and tin. Several joint stock companies, such as Mongolsovtsvetmet, Mongolchekhoslovakmetall, and Mongolbolgarmetall, were formed to develop and to exploit these deposits. By the late 1980s, mining was an important sector of the economy, and accounted for 42.6 percent of exports in 1985. Little information was available on mining output.

In 1985 Mongolia mined 6.5 million tons of relatively lowgrade varieties of coal, of which only 225,200 tons, or 3 percent, was exported. Exploited lignite deposits were located at Aduun Chuluu, near Choybalsan; Baga Nuur; Nalayh, near Ulaanbaatar; and Sharin Gol, near Darhan. The Aduun Chuluu coal mine's annual output was 300,000 tons. The Baga Nuur strip mine, developed in the 1980s, produced 2 million tons annually by 1985. The Nalayh coal mine, the country's oldest, produced 800,000 tons annually in the 1980s. The Sharin Gol strip mine, developed in the 1960s, had an annual output of 1.1 million tons in the 1980s. The large Tavan Tolgoy deposit of coking coal remained unexploited because of its remoteness from transportation and industrial centers. The Eighth Plan called for raising coal production to 9 million tons, labor productivity 22 to 24 percent, and the capacity of the Baga Nuur mine.

The copper and molybdenum deposit at Erdenetiyn-ovoo was discovered by Mongolian and Czechoslovak geologists in the mid1960s and was developed with massive Soviet assistance in the 1970s. Erdenet's development required the construction of a branch railroad line from Salhit, near Darhan to Erdenet; a highway from Darhan to Erdenet; a water pipeline from the Selenge Moron; an electric line from the Soviet Union; and factories, housing, and other facilities. A Mongolian-Soviet construction force numbering 14,000 built the Joint Mongolian-Soviet Erdenet Mining and Concentrating Combine, which included a mine, a concentrating plant, a material and technical supply base, a mechanical repair plant, and a high-capacity thermal and electric power plant. The first stage of the Erdenet combine went into operation in 1978, with a planned output of 50,000 tons for 1979. With the completion of the fourth stage in 1981, planned annual production capacity was 16 million tons of concentrate. From 1979 to 1982, Erdenet's output of concentrates amounted to 250,000 tons of copper and 3,400 tons of molybdenum, with concentrates containing 33 percent copper and 50 percent molybdenum. In 1983 the Erdenet combine was completed. During the Eighth Plan, annual capacity was to reach 20 million tons. No information was available on actual output or exports.

Other nonferrous metals exploited by Mongolsovtsvetmet and other joint ventures were fluorite, wolfram, tin, and gold. The Berh, Bor Ondor, Burentsogt, and Har-ayrag fluorite deposits had an annual output of 786,700 tons; fluorite was exported to the Soviet Union, but no figures were available. The Eighth Plan called for expanding fluorite production capacity by an unspecified amount. No figures were available on output or on exports of wolfram, tin, and gold. In the late 1980s, plans to open the Urandosh phosphate strip mine near Hatgal were delayed by concerns for environmental pollution in Hovsgol Nuur. Exploitation of the Burenhaan phosphate deposit still was planned. Further development of Mongolia's other mineral resources was also planned, and the Eighth Plan called for continued cooperation with Comecon countries in geological prospecting and mining.

Energy

In the late 1980s, energy in Mongolia was provided primarily by coal-burning thermal and electric power stations. Other energy sources were hydroelectric power, wood, and imported gas and diesel fuel. Mongolia produced its own oil in the 1950s and the 1960s, but reports on oil exploitation ended in 1968. Increased electric power generation, made possible by the expansion of coal mining since the 1960s, powered the rapid development of industry after Mongolia's entry into Comecon. In 1960 when coal production was 618,800 tons, 106.4 million kilowatt-hours of electricity were generated. In 1985 coal production increased to 6.5 million tons, and electricity generation rose to 2.8 billion kilowatthours . Per capita electricity generation increased from 111.7 kilowatt-hours in 1960 to 1,487.3 kilowatt-hours in 1985. In 1985 electric power and thermal energy generation and the fuel industry accounted for 11.3 percent and 4.3 percent, respectively, of gross industrial output.

In the late 1980s, despite the growth in power generation, Mongolia suffered from energy shortages. Electricity shortfalls interrupted the power supply for industries and households in urban areas, and many rural areas lacked electricity. The Eighth Plan called for increasing energy generation, extending rural electrification, and improving the efficiency of the energy industry by economizing on unit fuel consumption and by raising labor productivity. Specifically, the plan called for raising the generation of electric power to between 3.2 billion and 3.4 billion kilowatt-hours and thermal energy to 7.4 million to 7.6 million giga-calories by 1990. Capital investment in the energy industry was to amount to 2.7 billion to 2.9 billion tugriks. Extension of the centralized power supply and rural electrification were to occur by expanding facilities in Ulaanbaatar, by constructing power plants in Baga Nuur and Erdenet, and by building power lines to connect the cities of Arvayheer, Buyant-Uhaa, and Tsetserleg, and more than thirty somons. More remote areas were to install diesel-powered and coal-powered energy generating installations to meet their requirements.

Construction

In 1985 the construction sector generated 4.9 percent of national income, and the construction materials industry produced 6.7 percent of gross industrial output. Mongolian statistics indicated that approximately 28,200 workers were involved in construction projects and that 8,500 workers were employed in the manufacture of construction materials in 1985. Mongolian statistics, however, were misleading because they did not include the role of military and foreign labor in the construction sector. The Soviet Union and, to a lesser extent, East European countries and China, played a key role in constructing Mongolia's infrastructure. The Erdenet combine, for example, was built by a 14,000-strong joint Mongolian-Soviet work force that included military construction troops and workers of the Soviet construction company, Medmolibdenstroy. Other Soviet construction companies working in Mongolia included the joint-stock company, Sovmongolpromstroy, which built industrial facilities, and Mongolenergostroy, which constructed electric lines and power stations. In the mid-1980s, Mongolian construction teams undertook 40 percent of construction work; Soviet and other Comecon countries undertook the rest. China provided laborers to help build up Mongolia's transportation and industrial infrastructure in the 1950s, but such aid ceased with the SinoSoviet rift in the 1960s. In addition, in the 1980s Mongolian military construction troops were involved in building many industrial, agricultural, and other facilities.

In the late 1980s, the construction sector was plagued by substandard work, delays in completing projects and in installing equipment, and shortages of labor and building materials. To alleviate these problems, the Eighth Plan called for increasing total construction and installation work by 26 to 29 percent, for raising the work performed by Mongolian construction teams by 42 to 44 percent, and for increasing labor productivity by 20 to 22 percent. Manufacture of construction materials was to increase by 160 to 170 percent, and labor productivity in the construction materials industry, by 36 to 38 percent. Measures to increase construction efficiency were recommended, including channeling capital investments into priority projects; reducing construction times and the amount of incomplete construction; improving coordination among planning, construction, and supply organizations and their clients; creating specialized enterprises for rural construction work; and improving working and social conditions for construction workers in order to reduce labor shortages.

Mongolia

Mongolia - Banking and Insurance

Before 1924 Mongolia lacked its own banks and currency. Mongolians bartered, using such commodities as livestock, tea, and salt for exchange, or such foreign currencies as the United States dollar, the Russian ruble, the British pound, and the Chinese Mexican dollar (or, Yanchan, then a standard currency in coastal China) in commerce. Chinese and Russian banks offered credit, as did monasteries and private moneylenders. The government began to transform this chaotic monetary situation with a series of reforms, starting with the establishment of Mongolbank, or the Mongolian Trade-Industrial Bank, in June 1924. Mongolbank was founded as a Mongolian-Soviet joint-stock company. In February 1925, the tugrik was made the official national currency, and it was slowly introduced into circulation over the next three years. In April 1928, all other currencies were withdrawn from circulation. In 1929 the government drove private moneylenders out of business by establishing a monopoly on foreign trade and then outlawing private lending.

The establishment of a stable financial and monetary system, with a centralized bank controlling the national currency flow, permitted the government to introduce a First Plan in 1931. In 1933 additional banking reforms strengthened the position of Mongolbank in the economy. All state and cooperative enterprises were required to keep their accounts with the bank, and cash transactions were limited effectively to the household sector of the economy. Thus Mongolbank, which was firmly under government control, was able to monitor and to supervise the business transactions of all enterprises. In April 1954, the Soviet Union handed over its shares in Mongolbank, which was renamed the State Bank of the Mongolian People's Republic. In 1960 the bank's lending activities were restricted to state, cooperative, and private enterprises for which investment funds were approved by the national budget.

In the late 1980s, the State Bank granted short-term credits to cooperatives and state enterprises and long-term credits to the economy's industrial sector. Government borrowing from the bank was limited, although the limits were not always followed. The State Bank worked closely with the Ministry of Finance, and it was governed by a central board. In 1984 the State Bank had more than 400 offices and branches throughout the country. The State Bank, as the central bank, conducted currency transactions with foreign countries and had agent relations with about seventy foreign banks. Insurance was offered by the State Directorate for Insurance, or Mongoldaatgal, which was under the control of the Ministry of Finance.

Mongolia

Mongolia - Labor Force

Composition

In 1921 nomadic herders and monks dominated Mongolia's work force. Foreigners--Russians and Chinese--comprised the vast majority of the work force for all other occupations, namely agriculture, trade, handicrafts, and services. Mongolia faced the task of transforming the labor force into one capable of filling the variety of occupations required by a modern socialist economy. At first, the new government encountered numerous problems in building its work force, including illiteracy, the lack of qualified personnel, labor shortages, and attitudes inconsistent with systematized work and regular hours. As a result of these problems and the economy's initially slow development, the labor force remained primarily agrarian until the mid-1960s.

The composition of Mongolia's labor force changed slowly in the 1920s and the 1930s. In 1924 party leader Horloyn Choybalsan remarked that Mongolia had no more than 150 industrial workers. By 1932 the country had 2,335 "workers and employees" (employees were defined as nonproduction state employees, such as administrators and professionals), of which 302 were industrial workers. By 1936 industrial workers had increased to 2,400, and they had surpassed 10,000 in 1939. There were 33,100 workers and employees in 1940; nevertheless, 90 percent of the work force was engaged in agrarian pursuits--primarily, in herding. The distribution of the worker and employee work force in 1940 was 41.4 percent in industry, 29.3 percent in nonproduction occupations, 3.0 percent in agriculture, 4.2 percent in trade and communications, and 2.2 percent in trade. Large-scale transformation of the work force accompanied the major effort to industrialize and to collectivize agriculture after World War II. By 1960 agricultural and forestry workers represented 60.8 percent of the labor force; industrial and nonagricultural material production workers, 26.2 percent; and employees engaged in nonmaterial production labor, 13 percent. In 1985 agricultural and forestry workers dropped to 33.8 percent of the work force, while industrial and nonagricultural production workers rose to 39.8 percent, and nonproduction workers, to 26.2 percent.

Furthermore, large numbers of women entered all sectors of the economy as it developed. Women and children traditionally took part in herding activities; as the economy expanded, so did women's participation. Between 1960 and 1985, women's representation in the "worker and employee" work force rose from 30.8 percent to 51.3 percent. According to the 1979 census, women comprised 45.6 percent of the work force. Sixty-nine percent of all employed women, or 42.5 percent of the work force, were engaged in material production. Thirty-one percent of all employed women were engaged in nonmaterial production; these women comprised 54.6 percent of all workers in nonmaterial production.

Foreign labor played a major role in the development of Mongolia's economy. Because of labor shortages, Chinese and Soviet workers initially constituted a large proportion of the industrial and construction force. In 1927 about 26 percent of industrial workers were Mongolian, and in 1934 about 50 percent were foreign. In 1940 Mongolians made up 87.7 percent of all workers and employees; 6.6 percent were Chinese; and 5.7 percent were Soviets. In the 1950s, China sent approximately 10,000 laborers to Mongolia to engage in such construction projects as road and bridge building. In 1961 the number of Chinese workers peaked at 13,150; then, it declined, in the wake of the SinoSoviet split. Soviet citizens had a major role in the Mongolian economy as advisers and employees of joint Mongolian-Soviet enterprises, particularly after 1960. Smaller numbers of East European experts also came to Mongolia after its 1962 entry into Comecon. At the beginning of the 1980s, about 32,000 Soviets and 15,000 East Europeans were working in Mongolia.

Labor Force Policy and Planning

The Mongolian regime sets and implements labor force policy and planning. In the late 1980s, policy on the work force followed the General Plan for Development and Distribution of the Mongolian People's Republic's Productive Forces for the Period up to the Year 2,000 and the Program for Optimal and Rational Use of the MPR's Labor Resources. Manpower was managed by the State Committee on Labor and Wages until January 1988, when the committee was dissolved and its functions were absorbed by the new State Planning and Economic Committee. The major objectives of state manpower policy were: planned filling of all jobs with workers possessing the appropriate occupational qualifications in order to satisfy manpower requirements for the smooth functioning of the economy; full employment, balancing the number of workers with jobs available; increased labor productivity in all economic sectors; and manpower management based on principles of free will and material interest and on observance of the constitutional right to work and to free choice of occupation. The government planned labor resources and allocated labor by drawing up a national manpower balance sheet for one-year and five-year periods. This balance sheet, which aggregated territorial and administrative manpower balance sheets, took into account total population, total labor resources, distribution of labor resources, and estimates of additional manpower and training requirements; it also estimated the number of young people starting work or study courses. Analysis of the national manpower balance sheet enabled the state to plan for the training and the allocation of skilled manpower.

Special emphasis was placed on domestic vocational and technical training and on training opportunities abroad. In 1985 Mongolia had 40 vocational training schools with an enrollment of 27,700. Many Mongolians studied and took training courses of varying duration in the Soviet Union and other Comecon countries; in 1988 there were approximately 10,000 such students in the Soviet Union. The Eighth Plan called for the training of 52,000 specialists with higher and secondary technical specialist education and for no fewer than 60,000 skilled workers. As a result of such training, Mongolia's literate work force possessed increasingly sophisticated technical skills.

The state allocated manpower in two principal ways. First, local committees considered individual wishes, place of residence, and family situation, then provided work warrants to graduating students from all levels who were not pursuing further education. These work warrants compelled the management of organizations requesting workers to give the graduating students work in the appropriate occupation, as well as to provide additional training, housing, and other benefits. Second, state labor organizations recruited workers to fill positions. Workers could choose occupations, and they signed contracts committing them to work for either an indefinite period or for a fixed period of up to three years. State recruitment of labor was important because of labor shortages in certain sectors of the economy. With increased urbanization and the emphasis on specialized technical training, agricultural laborers were scarce, as were workers in capital construction. Imbalances in the labor force, combined with the composition of the population (the World Bank projected in 1987 that by 1990 some 72 percent of the population would be younger than fifteen) have led at least one Western analyst to suggest that sectoral unemployment among Mongolia's well-educated youth would be a problem in the 1990s.

Working Conditions and Income

The Labor Law of the Mongolian People's Republic, enacted in 1973, set forth the framework governing working conditions, wages and benefits, and trade union activity for workers and employees. The labor of members of agricultural cooperatives was regulated by individual negdel charters; they were based on the Model Charter of the Union of Agricultural Associations, last amended in 1979, and on other legislation. The Labor Law and agricultural legislation emulated Soviet law.

Workers and employees had an eight-hour workday (six hours on Saturdays and on the eve of holidays), eight public holidays, and fifteen days' paid vacation. In 1989 some service collectives were experimenting with a five-day workweek to determine whether the country should change from a six-day to a five-day workweek. Those engaged in arduous labor worked seven-hour days. Overtime was restricted, with some exceptions for emergencies. Minors (ages sixteen to eighteen; some fifteen-year-olds could obtain permission to work) worked a seven-hour day, and they received thirty days' paid vacation; arduous labor for minors was prohibited. The Labor Law contained sanctions for those who violated labor discipline and incentives for outstanding work performances. Workers, employees, and negdel members received compulsory state social insurance, paid for by their employers or negdels. State social insurance provided benefits for temporary incapacity to work because of illness, pregnancy and birth; benefits for birth of a child and for burial; and pensions for old age, disability, and loss of a breadwinner. In addition, state social insurance funds maintained a system of rest homes, sanitoriums, resorts for workers and employees and their families, pioneer camps, and so forth. The retirement age for the entire work force was sixty years for men with twenty-five years' experience and fifty-five years for women with twenty years' experience. Employers provided funds, full pay, reduced work days, and leaves of absence in order to raise the professional and technical qualifications of workers and employees through study and training courses.

Because of the high percentage of women of childbearing age in the labor force, the Labor Law contained provisions to protect pregnant women and women with children younger than one year. Refusal to hire women, reduction of their earnings, or dismissal because of pregnancy or the existence of children were all illegal. With medical commission concurrence, pregnant and nursing mothers were eligible for a shortened workday and for transfer to lighter work; they were not eligible for night work, overtime, or business trips. Women received forty-five days' pregnancy leave and fifty-six days' birth leave; women who did not fully use their pregnancy leave could combine the remainder with birth leave. Mothers also could combine pre-partum and postpartum leave with annual leave. In addition, they could receive an additional six months of unpaid leave and retain their jobs. Nursing mothers were granted paid breaks of up to two hours per day to nurse infants younger than six months and one hour to nurse infants from six to twelve months. Workplaces with large numbers of female employees were required to provide facilities for nurseries, for kindergartens, for nursing mothers and infants, and for personal hygiene.

National income in Mongolia in the 1980s was supposed to be distributed according to socialist principles contained in Article 17 of the Constitution. First, the state deducted from the social fund for "the expansion of socialist production, the creation of reserves, the development of public health and education, the maintenance of the aged and the disabled, and the satisfaction of the collective requirements of members of society." Second, the remainder of national income was distributed in accordance with the quality and quantity of labor, based on the socialist principle "from each according to his ability, to each according to his labor." Information on real wages and income, however, was scarce. Western sources estimated that 1985 per capita income was $880 based on gross domestic product (GDP) and $1,000 based on GNP. Mongolian sources referred to raising wages and income in percentage terms, but they rarely listed actual numbers. The Economic and Social Development Guidelines for 1986- 90 stated that during the Seventh Plan real income per capita rose by 12 percent, and they called for a 20-percent to 23- percent increase in monetary income during the Eighth Plan. Real income during the latter plan was to grow in part through wage increases and in part through such measures as reduction of electricity tariffs and a 30-percent increase in the minimum pension for negdel members.

Government statistics provided only limited information on salaries. For example, statistics on the growth rate of monthly average salaries for workers and employees indicated that salaries rose 44.2 percent between 1960 and 1985. Salaries of production workers rose 54 percent, and those of nonproduction employees rose 22.9 percent. No figures were available on the actual level of salaries. Average annual wages for negdel members rose from 474 tugriks in 1960 to 2,400 tugriks at the end of the 1970s.

Trade Unions

Mongolia's trade union movement initially had a difficult start, but then it settled down to peaceful growth as a useful tool of the regime. In 1917 Mongolia's first two trade unions, which had mostly Russian and few Mongolian members, were established but trade unionists were murdered in 1920 by troops of the White Russian baron, Roman Nicolaus von Ungern-Sternberg. Reestablished in 1921 with 300 members, the unions were reorganized in 1925 into Mongolian, Chinese, and Russian chapters. In August 1927, 115 delegates, representing 4,056 union members, held the First Congress of Mongolian Trade Unions, establishing the Mongolian trade union movement in the form it still maintained in the late 1980s. In 1927, as in the late 1980s, the organization and functions of Mongolia's trade unions were patterned on those of the Soviet Union.

In the late 1980s, the highest-level trade union organization was the Mongolian Trade Unions Congress, which was convened every five years; the thirteenth congress was held in 1987. In the interim, trade union affairs were run by the Central Council of Mongolian Trade Unions. The chairman of the Central Council was a member of the Mongolian People's Revolutionary Party Central Committee and of the Presidium of the People's Great Hural. Mongolian trade unions, through the Central Council, possessed the right of legislative initiative in the People's Great Hural. Below the Central Council were four branch union organizations--each run by its own central committee--for agricultural workers; for construction and industrial workers; for workers and employees in transport, for communications, trade, and services; and for employees in culture and education. Each aymag, as well as Ulaanbaatar, Darhan, and Erdenet, had its own trade union council, as did the Ulaanbaatar Railroad. Below the provincial level there were 3,000 primary trade union committees and more than 7,000 trade union groups. The Central Council published the newspaper Hodolmor (Labor) three times a week and the magazine Mongolyn Uyldberchniy Eblel (Mongolian Trade Unions) six times a year. In 1982 there were 425,000 trade union members. In 1984 about 94.7 percent of all office and professional workers and laborers in the national economy were trade unionists, and members of the working class accounted for 55.8 percent of trade union membership.

Mongolian trade unions did not engage in collective bargaining to represent worker interests to management as was done in capitalist countries. Instead, Mongolia's trade unions had a variety of functions. Politically, trade unions received party and state guidance and served regime goals by ". . . [contributing] to winning over the masses in order to succeed in the implementation of the social and economic policy of the party." The Mongolian trade unions were active in the international arena; the Central Council of Mongolian Trade Unions joined the World Federation of Trade Unions in 1949, and Mongolia joined the International Labour Organization in 1968. The Central Council maintained contacts with more than sixty foreign trade union organizations, and it sent delegations to all World Federation of Trade Unions congresses and other international trade union conferences. Mongolian delegations to conferences sponsored by the Soviet Union and other socialist countries frequently issued communiques or statements supporting Soviet, and criticizing United States, policies.

The most important functions of Mongolian trade unions were, according to the 1973 Labor Code, "[to] represent the interests of workers and employees in the realm of production, labor, life, and culture, participate in working out and realizing state plans for the development of the national economy, decide questions of the distribution and use of material and financial resources, involve workers and employees in production management, organize the socialist competition and mass technical creativity, and promote the strengthening of production and labor discipline." Together, or by agreement with enterprises, institutions, and organizations and their superior agencies, trade unions influenced labor conditions and earnings, the application of labor legislation, and the use of social consumption funds. Specifically, this meant trade unions supervised the observance of labor legislation and rules for labor protection, controlled housing and domestic services for workers and employees, and managed state social insurance as well as trade union sanatoriums, dispensaries, rest homes, and cultural and sports institutions. In practice, the major function of trade unions was the administration of state social insurance and of worker health and recreation facilities.

Despite the broad rights granted to the trade union movement, not all trade union bodies carried out their stipulated functions. In a May 1987 address to the Thirteenth Congress of Mongolian Trade Unions, party general secretary Jambyn Batmonh criticized some trade union councils for being "on the leash of the enterprises' administrations," that is, emphasizing the fulfillment of plans while neglecting labor productivity and substandard working and living conditions. Batmonh also called on enterprises and their supervisory government bodies to observe labor laws strictly and not to oppose the legitimate demands of trade union groups.

Mongolia

Mongolia - Foreign Economic Relations and Comecon

In the late 1980s, Mongolia's foreign economic relations were primarily with Comecon members and other socialist countries. Mongolian policies related to Comecon were set by the Comecon Commission of the Council of Ministers. The principal official mechanisms for bilateral foreign economic relations were the various joint intergovernmental commissions on economic, scientific, and technical cooperation, which were established by treaty in the 1960s, the 1970s, and the 1980s between Mongolia and the Soviet Union as well as other socialist nations. Intergovernmental commissions--such as the Mongolian-Soviet Intergovernmental Commission for Economic, Scientific, and Technical Cooperation--met annually or semiannually to coordinate planning and to arrange bilateral annual, five-year, and longerterm trade and cooperation agreements signed on the deputy premier level. The Ministry of Foreign Economic Relations and Supply primarily, but not exclusively, was handling Mongolia's day-to-day economic interaction with foreign countries and with Comecon in the late 1980s.

Close economic ties between Mongolia and the Soviet Union have existed for a long time. For example, in 1984 MongolianSoviet links included direct ties among 20 Mongolian and 30 Soviet ministries and departments handling economic affairs as well as among 55 Mongolian and Soviet ministries and departments and about 100 Mongolian and Soviet scientific research organizations handling scientific and technical cooperation.

In December 1987, the Ministry of Foreign Economic Relations and Supply was formed from the Ministry of Foreign Trade, the State Committee for Foreign Economic Relations, and the State Committee for Materials and Technical Supplies. Because much of Mongolia's machinery and equipment, fuel, and consumer goods were imported, the Ministry of Foreign Economic Relations and Supply-- rather than the Ministry of Trade and Procurement (which ran Mongolia's domestic trade system)--had specialized organizations that combined export-import and domestic distribution functions. These organizations included Abtoneft Import and Supply Cooperative, which handled imports of motor vehicles, fuels, and lubricants; the Agricultural Technical Equipment Import and Supply Cooperative; Kompleksimport and Supply Cooperative, which imported sets of equipment for the mining industry, power stations, and production lines for the food and light industries; the Materialimpeks and Supply Cooperative, which imported construction materials and equipment; and the Technikimport and Supply Cooperative, which handled imports of industrial machinery and equipment, raw materials, chemicals, and dyestuffs.

Other organizations involved in foreign trade included Mongolimpex, which handled imports and exports of goods in convertible currencies; Mongolnom, which exported Mongolian publications; and Mongolilgeemj, which handled foreign parcel post, the sale and purchase of consumer goods, establishment of business contacts with foreign companies, and intermediary service on foreign trade and commodity exchange. The Ministry of Social Economy and Services ran Horshoololimpex, which exported handicrafts. Mongolia also had a Chamber of Commerce, the functions of which included establishing contacts between Mongolian and foreign trade and industrial organizations as well as organizing and participating in international trade exhibitions in Mongolia and abroad.

Participation in Comecon

Entey into Comecon was a great boon to Mongolia's economic development, enabling it to secure increased amounts of foreign investment, assistance, and technical cooperation; to expand foreign trade markets; to raise product quality to international standards; and to coordinate economic planning better in order to direct the specialization and development the of the economy under "socialist economic integration." Mongolia coordinated its five-year plans with Comecon's five-year multilateral cooperation plans as a participant in Comecon's Cooperation in the Sphere of Planning Activity Committee as well as its Science and Technology Cooperation Committee. These committees also drew up multilateral long-term, special cooperation programs in the areas of transportation, food, energy, and consumer goods, which included development projects in Mongolia, such as the thermal electric power plant in Baga Nuur. Mongolia also participated in Comecon commissions for agriculture, coal industry, electric power, food industry, geology, light industry, nonferrous metallurgy, and transportation, and it cooperated in Comecon efforts in construction, currency-finance, foreign trade, health care, standardization, statistics, telecommunications, and postal communications.

Mongolia also received assistance from Comecon on a multilateral basis. Comecon financed the activities of the Comecon International Geological Expedition and the construction of a number of scientific, communications, and cultural facilities in Mongolia. As a member of Comecon's International Bank for Economic Cooperation and the International Investment Bank, Mongolia was eligible for, and took advantage of, loans at preferential rates. Mongolia also benefited from "incentive prices" for basic imported commodities; such commodities as fuel were imported at lower prices than those charged to Comecon's more developed East European countries.

Mongolia

Mongolia - Tourism

In the late 1980s, tourism played a minor role in Mongolia's foreign economic relations. About 10,000 foreign visitors came from communist, North American, and West European countries annually. Mongolia has natural, historical, and cultural sites of interest to foreign tourists, such as the Nemegt Valley's "dinosaur graveyard," the ancient city of Karakorum, and the medieval Erdene-Dzuu monastery. Hunting expeditions also are a tourist attraction. The Foreign Tourist Office, Juulchin, which was part of the Ministry of Foreign Economic Relations and Supply in 1989, handled all foreign tourists.

Mongolia