👓 LABOR MARKET | MONGOLIA-U.S. RELATIONS | MINIMUM WAGE

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🤔 DID YOU KNOW?

🤝 35 YEARS OF MONGOLIAN-AMERICAN RELATIONS

We previously covered the appointment of America’s new ambassador to Mongolia here. This time, we’ll dive a little deeper and take a look at the most important aspects in the relations between the two countries.

Democracy

The fact that we are a democratic country sandwiched between two notoriously authoritarian regimes likely compels Americans to financially contribute to our economy in comparably higher amounts. A great example are the activities of the Millennium Challenge Corporation in Mongolia. The agency first signed a $284.9 million compact with the Government of Mongolia in 2007 and another $350 million compact later in 2021.

If we take a look at the general state of economic relations between us:

• What we give: We don’t exactly have a huge variety of goods that we sell to the United States. Mining products remain the main export item, with raw materials accounting for 94% of all exported products worth $9 million in the first ten months of the current year.

• What we receive: America’s exports to Mongolia mainly consist of cars and their equipment, food and consumer goods. This year, products from the United States made up 3% of our total imports, reaching $209 million.

Investment

Since the transition to democracy in 1990 and up until 2013, Mongolia received investments worth more than $308 million from America. The amount has steadily risen for the past five years, hitting $703 million per year on average. Despite such growth, the government’s efforts to keep these investments coming seem a bit lackluster.

• Transparency: In order to boost trade between the two countries, a Transparency Agreement was signed in 2013 and entered into force in 2017. However, the weak legal framework has been delaying its success for a couple of years now.

• Corruption: In 2021, we ranked 110 out of 180 countries on the Corruption Index, a key indicator that directly affects foreign investments.

In any case, the development of bilateral relations between the United States and Mongolia is clearly dominated by American grants and aids. Whether we’re taking full advantage of these contributions has, however, yet to be proven.

📉 DATA STORY

Since the majority 99.8% of Mongolia’s debt is foreign currency debt, it will become increasingly harder for us to pay our loans as the tugrik continues weakening against the dollar. According to the IMF's advice, the situation should be addressed with long-term fiscal policies to reduce inflationary pressures and continued support for vulnerable groups of society. Unfortunately, we currently lack both.

👓 LABOR MARKET

The World Bank has recently conducted a Job Diagnostic analysis in Mongolia. Here are its key findings.

The issues ⚠️

Due to Covid-19 and a number of economic factors, employment has decreased by around 5% in 2021. Although the labor force participation rate stands at 59.2% as of Q3 2022, which is an increase of 1.3 percentage points compared to the previous quarter, it’s still 5.1 points less than 10 years ago.

• Productivity has been stagnant due to the non-mining sectors' decline which employ a large proportion of the country's total workforce.

• Macroeconomic instability prevents the establishment of favorable investment conditions needed for job creation and productivity growth. A conducive business environment is also lacking in the private sector.

Challenges the workforce faces

The analysis mentions overlapping social benefits and the scarcity of necessary incentives as one of the causes for concern, pointing out that:

• Around 50% of graduates do not work in the field of their profession, which might be a result of poor education and a gap between job requirements and actual skills of the workforce.

• There is a 15 percentage point difference in the labor force participation rate between men and women. Furthermore, the employment rate of women living in urban areas with children aged 5 and under is 8% lower than that of other women.

In the end

Systematic measures, such as the promotion of the private sector’s development, as well as the adoption of appropriate labor market policies, might be the most suitable mid-term solutions for the problems mentioned above. In the long-term, however, we can’t really escape the need to prepare not only better jobs, but also better workforce.

🏃‍♀️ QUICK STORIES

📌 National minimum wage to be raised to ₮550 thousand. The public opinion is divided on whether the decision is congruent with the country’s tight monetary policy. While raising the minimum wage will improve employment in some sectors, it will also increase the money supply in the economy.

📌 Central Bank of Mongolia raises key policy rate by 1 percentage point to 13%. The increase was announced by the Monetary Policy Committee of the Bank of Mongolian December 15. Notably, the key policy rate stood at 6% at the beginning of the year.

📌 Erdenes Tavan Tolgoi coal to be traded on Mongolian Stock Exchange. 30% of the company’s total coal exports will be openly traded on the MSE under the supervision of the Financial Regulatory Commission until July 1, 2023. The decision was made in an effort to bring transparency to the mining industry after the recent coal theft incident.

📌 Mongolian Stock Exchange approved to go public. On December 14, the Financial Regulatory Commission announced the listing of additional shares issued by the MSE as securities approved for public offering. The MSE hereby becomes the first company to go public out of the 25 state-owned enterprises legally required to do so.

🟦 TOP NEWS

1. Mongolians brave the cold to decry corruption (The Economist)

2. Mongolia trying to 'diversify' gas sector to get away from dependence on Russian neighbour (Sky News)

3. E-Sports to be included in "Ulaanbaatar-2023" East Asian Youth Games (MONTSAME)

4. Interview With France’s Ambassador to Mongolia, Sebastien Surun (The Diplomat)

5. Erdeneburen HPP Project to be Intensified (MONTSAME)

6. Squeezed between China and Russia, Mongolia’s herders feel pinch (Al Jazeera)