The World Bank in Mongolia in partnership with the Parliamentary Standing Committee on Budget held a panel discussion on conclusion of the report “Mines and Minds-Leveraging Natural Wealth to Invest in People and Institutions” and recommendations related to it.
Last 20 years of experience shows that Mongolia has become increasingly reliant on mining-led growth, while at the same time, saving a measly one cent out of each dollar of its mineral output. Mining sector becomes main leverage to broaden economy, intensify production and move forward the country’s prosperity, nonetheless, economy is becoming overly dependent on the mining sector and vulnerability is increasing. For example, mining sector was making up 42 percent of total export of Mongolia in 2000 while it increased to 89 percent by 2019. Furthermore, mining sector takes up one fourth of Mongolia’s economy and its revenue makes up one fourth of budget income, reports the World Bank.
“Mine represents Mongolia’s present, while minds - human and institutional development - are its future. Therefore, investment should be made into encouraging human development,” WB senior economist for Mongolia Jean-Pascal Nganou said.
Attendees of the discussion stressed that Mongolia is using minds or human and institutional potentials deficiently and touched actions needed to be taken to stabilize macro economy, promote productivity growth and use human capital effectively in the future.
“The Ministry of Finance has been implementing policy to reduce debt at sustainable level and create future savings since 2017. Mining revenue makes up around one fourth of budget income and around one third is being accumulated in future heritage fund. The future heritage fund will not be used until 2030. About the spending of 99 percent of income gained from mining sector, I understood that the World Bank researchers made the conclusion based on total mining income coming to Mongolia,” Head of Financial Policy Department of the Ministry of Finance Ts.Zorigtbat said.
Executive Director of Energy Resources LLC G.Battsengel said that Mongolia’s economy would not have grown 13 times in the last 20 years without mining sector. Mining sector demands intellectual investment aside from monetary funding. Therefore, mining companies should introduce technologies for processing, enrichment and value added production besides exploration. With more new technologies in the sector, there is an opportunity to raise its export value.
The economy is expected to intensify as mining revenue increases, but due to insufficient savings fall in commodity prices causes fluctuations in the mining sector, the budget, finance and the economy as a whole. This worsens people’s livelihoods and broaden cycle of poverty, the World Bank representative remarks. Therefore, the World Bank suggests making structural change and taking policy measures to make economy, which is dependent on mining, a productive and mind-based.