The Mongolian economy is transforming and expanding at an unprecedented rate. We are experiencing growth in every sector of the economy, from air travel to construction, from restaurants to retail. This high rate should be maintained throughout the decade: a $6bn economy in 2010 is projected to double in size in 2012, and quadruple by 2016. “Beating the market” has become a common theme in the business strategies of Mongolian companies. To fuel growth, we need trained and skilled people to manage and operate the businesses which will build our airports, power plants, roads, railroads and guide clean technology investments. These goals require focus and discipline.
Mongolia has a vast land area that is rich in mineral resources and receives 300 days of sunshine per year. Geography is the country’s biggest advantage, but at the same time it also poses the greatest challenge to businesses. Experience shows that successful economic development comes not from an imposing government but from a robust, resilient and proactive private sector. If competitiveness is defined as the ability of an economy to produce goods and services that sustain people’s livelihood, we should focus on boosting the health and productivity of the national companies that deliver those goods and services.
Mongolian assets that were built, owned and managed by the government between 1960 and 1990 were extensively privatised over the past 20 years. Today the government owns just the basic infrastructure: airports, roads, railroads and power plants. The private sector is already an active player in primary industries such as mining and agriculture, in large service sectors – telecommunications, domestic air transportation, banking and finance, and tourism – and is increasing its involvement in social services like education and health. Today, the private sector produces 80% of Mongolia’s GDP and employs 86% of the total labour force. However, further growth and expansion is jeopardised by insufficient investment into core infrastructure. This was evident in Mongolia’s first competitiveness report, published by the Mongolian Economic Policy and Competitiveness Research Centre (EPCRC) in 2011. EPCRC, the first of its kind in Mongolia, was initiated by the president and established by the business community leaders. The competitiveness report compares Mongolia’s economic performance, government efficiency, business efficiency and basic infrastructure against 14 other economies. It shows that Mongolia has failed to invest enough in its energy and transport infrastructure during the last 20 years.
For example, the last power plant that was built on the national grid was in 1986, whereas energy demand is expected to double by 2015. Only around half of the 14 airports have paved runways, whereas domestic air traffic increased by 50% in 2010-11. These largely government owned and operated sectors are holding back economic growth. The performance and efficiency of industries owned by the private sector such as telecommunications and information technology tells a different story. Competition among telecoms operators results in innovation and creativity, and improved customer service and coverage. Mongolians all across the country, a territory three times larger than France, are connected through the 3G voice and data network just as in other parts of the world. The mobile penetration rate is 95% and soon all Mongolians will be able to trade on the stock exchange through their smartphones.
Another successful strategy for Mongolian businesses will continue to be partnerships with global technology and industry leaders. These alliances will help Mongolians instil best practices and introduce new technology. GE, the global technology giant, recently entered the Mongolian market by investing in the country’s first windfarm and transferring its latest MRI machines to Mongolia to take advantage of its large wind and solar energy resources and the significant growth in its health care market. Infrastructure investment will encourage the private sector to expand and venture out to new areas. I believe Mongolia can position itself as Asia’s foremost clean energy powerhouse.
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