Business integrity country agenda
Mongolia’s economy continues to experience both growth and decline. In 2012, there was a high growth rate (12.3%) but this was lower than anticipated as the nation saw its coal exports drop significantly due to China’s economic slowdown. After a sharp slowdown from 2014-16 driven by a fall in commodity prices, corruption and declining FDI, the Mongolian economy became more robust in 2017: real GDP grew by 5.1%, buoyed by strong coal exports; a recovery of FDI; and improved business sentiments. The Executive Board of the International Monetary Fund (IMF) completed its first and second reviews of Mongolia’s performance under the programme supported by the Extended Fund Facility’s (EFF) three-year extended arrangement. The growth outlook remains positive for 2018 and beyond. However, despite the improving outlook, structural challenges and limited export diversification remain: these could amplify the economy’s vulnerability to commodity price or other shocks given its reliance on the extractive industries sector (20% of GDP).
In the boom years following 2010, poverty decreased as the economy grew. Between 2014 and 2016, however, when the non-mining economy was particularly hit by falling investment and declining private consumption, Mongolia’s poverty rate rose again to the 2012 level, a worrying development. Early signs of improvement in household incomes in 2017 and fiscally sustainable labour and social protection policies are the keys to reducing poverty in the coming years. To ensure sustainable and inclusive growth and poverty reduction, Mongolia needs to strengthen governance; build institutional capacity for the efficient management of public revenues; allocate its resources effectively among spending, investment, and saving; and ensure equal opportunities for all its citizens in both urban and rural areas, all in the context of environmental protection and intergenerational equity.
Recently, populist politicians have started to have a negative impact on business, including such practices as cronyism. As political parties become increasingly corrupt and have a damaging influence on business integrity, there is a strong need for a whistleblower protection law and the amendment of the political party financing law.
TI-Mongolia has been working with both the public sector and civil society organizations for the
past decade. Despite these efforts, many challenges still remain and TI-Mongolia recognizes the
necessity of also engaging the business community in the fight against corruption. Through direct
cooperation with the private sector, TI-Mongolia aims to improve corporate integrity and coalition building
to promote an open, competitive and transparent business environment.
The objective of the Business Integrity Country Agenda (BICA) is to assess the legal framework
related to business integrity and associated corporate practices. After the realities of doing business in
Mongolia are understood, a reform plan can be formulated, and appropriate tools and mechanisms
developed in order to support companies in their efforts to operate with integrity.
It is our hope that BICA will be used to trigger real change and grassroots improvement. The
diagnosis and recommendations resulting from the BICA assessment will serve as the basis for
developing a reform agenda which, we hope, will be then implemented collectively by relevant
stakeholders over the coming years until real change is achieved. Therefore, we encourage the
private and public sectors along with civil society to work together towards the transformation of
the overall business environment in Mongolia.